How to Get Rich Quick
Everyone is looking for the quickest way to get rich. In this video I discuss the three ways to develop wealth, and highlight the one way that is best at developing wealth and the economic concept you need to know.
Transcript
The number one question that I get from family members, friends, and students is what's your best advice to get rich quick. Over the years, I have had to answer this question time and time again.
Today on Coffee with Dr. A, I will tell you what my advice is on how to get rich quick.
If you are new here, I'm Dr. Abdullah Al Bahrani and I created this channel to increase understanding of economics. I strive to help people make better decisions by building a better foundation of econ knowledge.
Grab a cup of coffee and let’s talk about how to get rich quick
My brother has the best response to this question. He always says “easy come, easy go”.
The get quick rich question assumes that there is a magical pill that can provide you with the ability to make money overnight. When it comes to making money, the long game and consistent game is the only advice that I would give. There are Three ways to make money.
Let's break them down.
First, is luck- and this is what the social media financial gurus try to convince you to look into. Buy this stock, invest in this opportunity, and you will become rich and they base their statements on an example of luck. This reminds me of the lose weight quick advice that you find in advertising. Be wary of this advice. In fact, run away. Remember, my brother says, easy come, easy go.
Second- is leveraging your capital. The other way to make large sums of money is to invest large sums of money. Making 3% on 100 dollars means you are making $3. Making 3% on 100,000,000 means you made 3 million. So if someone is telling you about how much money they have made, ask them how much their investment was. If you do not have large sums of money to invest then you will love tip number 3.
Third- Leverage compound interest. This is by far my favorite method of getting rich, but it isn’t going to be quick. Let us talk about compound interest or compound growth. The example I give to my students is I ask them the following hypothetical situation.
Would you rather receive $50,000 a day for the next 30 days, or receive a penny (1 cent) today, that doubles in value every day for the next 30 days. If you are like my students, you have already pulled out a piece of paper and started calculating, you will probably calculate the growth of the penny till the 12 day where you will stop and say option A, receiving 50,000 a day is by far more valuable.
But you are wrong, what you are overlooking is the idea of compound growth or exponential growth. The 50,000 a day will accumulate to be equal to 1.5 million dollars after 30 days. That’s a lot of money, but it isn’t close to the compound growth of a penny that doubles in value everyday.
After 30 days then the penny will be worth …………5.3 million dollars.
I do understand that 100% daily returns is an exaggerated example, but it proves a point. Think about consistent long run returns to build your wealth. It also means the earlier you start the better. There is no perfect time to start, there is now or later. So get started today, even if it’s putting a penny away.
In the comments tell me honestly if you picked the 50,000 or the penny before I gave the answer.
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See you next week on Coffee with Dr. A