I get a kick out of the advertisements all over the internet offering a short cut to “get rich quick,” usually implying a job where they work just a few hours a week (from the comfort of their own home, of course). They draw this scenario of a stay-at-home mom sitting around on her laptop while her kids play, logging into her computer, and using some magical “system” to build massive amounts of profits without any particular skill or experience required. Then they’ll typically show a picture of that mom on a cruise ship or next to a brand new Mercedes-Benz. Or course, the “system” is available via a $37 ebook, and the only one getting rich is the guy with the sharp copy write skills selling to the fools that buy the book.
I could probably join the crowd and write my own ebook on how to get rich quick the BNL way, except that the only people open to my philosophy wouldn’t pay $37, and the guys that would spend $37 on an ebook have a different definition of “rich.” Alas, I’ll just have to give my ideas away for free as part of this 3-part series.
Step 1 – Redefine “Rich”
It might seem like a cop out to say “get rich quick” then change the definition of rich, but hear me out.
Most people have a radically different definition of “rich” than I do. As I see it, the commonly accepted definition of rich is defined as some absolute – as if we all have the same needs and desires (i.e. what is “rich” to me is different than what is “rich” to you). As if some monetary value of savings such as $1M or $5M is what it takes for someone to be rich. I completely reject this idea. Money in a savings account or brokerage account is nothing more than paper.
Instead, I view richness as as a ratio of your passive income generation compared to your desired expenses:
Richness = Passive Income / Desired Expenses
Once that ratio becomes greater than ‘1’ then you are rich by my account. As it approaches ‘1’ you are approaching richness (of “financial independence”). If your monthly passive income is $3000/month and your expenses are $2800/month, then by my definition you are rich. And this makes sense if you think about it. Without having to work, and with the ability to do what you want, when you want, you are able to fund your lifestyle. How could that not be rich?
Compare that to a hard working Wall Streeter working 100 hours/week and making $25,000/month, but spending the vast majority of it on an overpriced apartment, fancy cars, and fine dining. They have no time for family or leisure, and therefore are still not rich until their passive income grows enough to compensate for their high expenses.
But I think there is one flaw in my original equation. There are financially-compensating tasks out there that people love to do and would do it for free. For example, when I first started as an engineer (no wife or kids) I loved my job. I remember one night I was in the lab at about 10PM, working on a problem with my lead engineer. We got to talking about our long hours, and he asked me if I’d do this job for a fraction of what it paid, just because we both got such a thrill of making such cool products. We both agreed that we would. I think that made us both very rich at the time.
Similarly, I really enjoy writing on this website when time allows. I make a little money from ads, but not nearly enough that it even comes close to a good financial return for my time. But I do it anyways, and therefore I define this as “enjoyable income.” It’s money you make doing things you’d happily do for free.
There are many other forms of enjoyable income. Through this site I’ve been emailed from many people who say they have no desire to retire because they love what they do (artists, actors, engineers, and even someone working long hours on Wall Street).
So I wish to modify my definition of “richness” to take this “enjoyable income” into account.
Richness = (Passive Income + Enjoyable Income) / Desired Expenses
You don’t have to accept my definition of “rich,” but I hope you’ll check out Part 2 and Part 3 of this series, where I’ll be offering up dozens of ideas on how to control the variables of the richness equation to become very rich, very fast. I’ll provide many ways to increase passive income, seek out enjoyable income, and to reduce expenses. I hope this will allow the plethora of people who feel they are decades away from being “rich” and financially independent to realize they are not so far off from their goals, if they open their mind to a new way of thinking.