How to Become the Richest Man in Poughkeepsie

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Accumulating real wealth is actually much simpler than most people believe. Of course, "rich" is a relative term. Bill Gates topped the 2009 Forbes 400 list with a net worth of 40 billion dollars. Few would argue that a net worth of $40 billion would fail to meet any test of richness devised. Yet many of us would feel quite rich if we had a net worth of just one million dollars. A million dollars isn't what it used to be, but it is still a substantial number and relatively few people have that much money. Being a millionaire has, for some time, been an accepted measure of real wealth.

Since so few people have a net worth of one million dollars in this country, it seems reasonable to assume that acquiring one million dollars must be quite a difficult feat. Yet it is really simple to accomplish and within the reach of most. The major obstacle to acquiring one million dollars, to becoming rich, is that most people do not simply want to be rich — they want to be rich right now.

There are ways to get rich in a hurry. You could win a state lottery. You could receive a large inheritance from a long-lost, distant relative. You could even marry money. Your company could have a successful IPO, making you a millionaire overnight — but let's face it. Those options all rely on a good deal of luck and hardly constitute a reliable plan. While an ownership stake in a successful company is certainly one of the best ways to build wealth, your path to personal financial success may depend more on what you do with the money you take out of your company than the money you leave in.

It may not be easy to get rich quick, yet it remains quite possible to acquire real wealth in a reasonable period of time. There really isn't even a secret to doing so and no need to pay anyone a fee to learn how to go about it. The principles by which one becomes rich have actually been around for at least 6,000 years (maybe longer), but perhaps the principles were not as widely known until 1926, when George Samuel Clason's book, The Richest Man in Babylon, was first published.

In a nutshell, Clason's book is a collection of parables set in ancient Babylon through which he dispensed real-world financial principles. One section of the book, "Seven Cures for a Lean Purse," is the focus of the wealth-building principles presented here. Actually, only the first three cures will be discussed because it seems very likely that just grasping and following those three would be all that was necessary for the average person to acquire real wealth.

"Start thy purse to fattening. For every ten coins thou placest within thy purse take out for use but nine. Thy purse will start to fatten at once and its increasing weight will feel good in thy hand and bring satisfaction to thy soul." — George Samuel Clason

Once you get past the 17th-century English, it become readily apparent that the meaning of the first principle of building wealth is simply, get more money into your wallet. Clason explains further that the way you do that is by spending less than you earn. He even offers a figure. "For every ten coins thou placest within thy purse take out for use but nine." Save 10 percent. Few Americans save anything at all, much less 10 percent of their income each year. So to become rich, our first objective is to spend less than you earn by saving 10 percent of your income. Now we move on to the second principle.

"Control thy expenditures. How can a man keep one-tenth of all he earns in his purse when all the coins he earns are not enough for his necessary expenses?" — George Samuel Clason

Cure No. 2 suggests that once you have cultivated the discipline to save 10 percent of your income, do not allow yourself to start confusing "wants" with "needs" as people are prone to do. Watching the balance of your hard earned-savings grow, you likely will face strong temptation to blow it on an expensive vacation, new car or something else that you have somehow managed to live without. Almost by magic, most people's expenses seem to automatically rise to their level of available income. Don't let it happen to you. Bank your 10 percent each payday and then forget about it. Don't touch it. Leave the money to grow. Next, the third and final cure.

"Make thy gold multiply. I tell you, my students, a man's wealth is not in the coins he carries in his purse; it is in the income he buildeth, the golden stream that continually floweth into his purse and keepeth it always bulging. That is what every man desireth. That is what thou, each one of thee desireth; an income that continueth to come whether thou work or travel." — George Samuel Clason

Saving and preserving 10 percent of our income is only part of the equation. Savings interest rates are currently at historic lows and no one is going to get rich socking away their hard-earned cash in a passbook savings account. The money needs to be invested at a reasonable rate of return.

One possibility is finding a good mutual fund in which to park your 10 percent. Choose a fund that offers an average annual rate of return as close to 15 percent as possible. They aren't that hard to find. Further, choose a fund from a group known as "World Funds." This simply means that the fund manager invests in securities from other countries other than just the good old USA, an important aspect of diversification. Simply put, diversification in this sense means you are not banking on the economy of just one country, but many countries. Hopefully, even if one economy is struggling, others will be humming along and you will on average receive your goal of a 15 percent annual return over the long haul. Some years you won't achieve that, but in other years you will likely earn more and, over many years, attain or at least come close to that 15 percent goal. Annual return is a key to the larger goal of amassing real wealth.

Still unconvinced that accumulating one million dollars is not only possible, but easy?

As proof, meet mythical Mike, of Poughkeepsie, New York. Mike entered State University after high school at the tender age of 18. By his sophomore year, he had acquired a credit card or two which were promptly maxed out buying beer for the frat parties and had acquired a hefty car payment. Who could blame him? I mean, how could Mike impress the hot sorority girls without a stylish ride? So Mike, at age 20 and burdened with debt, was forced to leave school and find a full-time job to meet his financial obligations. He found a job at the local Burger Bill and began earning minimum wage (currently $7.25 per hour) flipping burgers and tending the deep fryer 40 hours per week. Thus, Mike earned $15,080 annually ($290 per week).

Understandably grieved that Mike did not fulfill their dreams of finishing college and becoming a brain surgeon so that he could provide them with a luxurious retirement in their golden years, Mike's parents included a copy of The Richest Man in Babylon in Mike's Christmas stocking one year in hopes that he would read it and improve his financial situation.

The picture tube in Mike's cheap, second-hand television set burned out one evening leaving Mike with time on his hands. In desperation born of supreme boredom, Mike dusted off the book he received at Christmas and began to read. He discovered the "Seven Ways to Cures for a Lean Purse." Never an avid reader, Mike only made it through the first three cures (coincidentally the same three principles examined here) but he found that what he had read made a great deal sense. He readily saw how they might apply to his own situation. Mike vowed to change his erring ways. He committed to saving 10 percent of his Burger Bill paycheck each week in hopes that someday he could live the lifestyle he knew he justly deserved.

Mike began by opening a savings account at Poughkeepsie National and dutifully deposited his $29 (10 percent of $290) each week into his account. Soon, he found he didn't even miss the money. After he had saved the $2,000 minimum needed to open an account with ACME Mutual Funds, Mike moved his savings there, selecting the ACME World Growth Fund as his investment of choice.

Time passed. More time passed. 34 years and nine months, to be exact. Mike is now 54 years old, a regional manager for Burger Bill, married, and had 2.2 children in college. He arrived home one day from work and spied his quarterly ACME Mutual Funds statement on the hallway table where his wife had left it. By now, Mike was able to afford HD digital cable and had a sweet 50-inch plasma flat screen in the den that occupied most of his spare time.

For years, he had just been tossing his mutual fund statements in a desk drawer even though he had continued his habit of sending in his $29 check each week since starting his 10 percent program all those years ago. For some reason, Mike was curious this time and decided to open the statement and check his investment balance. At first he couldn't believe his eyes as he scanned the figures on his statement. All those zeros! Could it be true? Yes! Mike's account had reached the one million mark in just under 35 years! He had hit the big time! He was rich! Mike was a millionaire, the richest man in Poughkeepsie!

Naturally, Mike could have reached his goal much sooner had he increased his monthly investment amount each month to represent a true 10 percent of his rising salary as it increased over the years instead of sticking to the original $29 per week. However, the story of mythical Mike was fashioned to illustrate the point that even someone who works permanently at a minimum wage job can amass a net worth of one million dollars in a reasonable length of time. All that is required to accomplish this simple feat is the self-discipline to spend less than you earn by saving 10 percent of your income, a commitment to preserve your savings by not blowing your savings on luxuries, a willingness to find and invest your savings in a solid investment that throws off a healthy return, and a reasonable amount of time. The miracle of compounding will do the rest.

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