1. Money
Joshua Kennon

The Big Secret: How to Be Financially Successful

By August 23, 2010

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Even though I have written hundreds of pages on the topic, include the How to Get Rich Guide for new investors, I receive tens of thousands of messages through Investing for Beginners at About.com, my personal site, and my Facebook account each month, asking me how to become financially successful. It may seem pithy or oversimplified but it really is this basic ...

If you want to be financially successful, there is only one way to achieve it sustainably:

  1. Spend less than you earn.

If you aren't doing that at this point in your life, you have only two available options.

You can choose one, the other, or combine them:

  1. Cut your costs
  2. Earn more money

Finally, you put your surplus funds to work for you instead of selling your labor.

Once you spend less than you earn, you will be left with a surplus each year.  Investing is the process of taking that surplus and putting it to work in assets that will generate money (preferably passive income).

Some people invest in stocks, some people start businesses, some people invest in real estate, some people prefer U.S. savings bonds, and some make payday loans ... it all comes down to your personal talents, personality, and interests.  This site, Investing for Beginners, is designed to help you understand how to put money to work in investments.  That is the part that can sometimes be complicated (learning how to read an income statement or balance sheet, for example).

It doesn't matter whether you are tall, short, black, white, gay, straight, Jewish, protestant, Catholic or Muslim, male, female, East Coast, West Coast, Midwest, old or young, whomever generates the most surplus and puts it to work in intelligent ways will end up richest.  Capitalism is the fairest economic system man has ever known, despite the protestations of some misguided academics such as Professor Wolff, because all of us are free to choose whether we end up broke or wealthy, with a few notable exceptions (such as serious health problems for you, a spouse or a child).

This is empowering.  As I told my family and friends many times, every choice we make in life gets us one step closer or further away from our goals.  Money is no exception.  As Aristotle said, "We are what we repeatedly do.  Excellence, therefore, is not an act but a habit."  If you repeatedly build up a surplus, over time, compounding will do the rest.

Comments
August 24, 2010 at 2:52 am
(1) Grifas.Opio says:

Before coming across this site I had never come across such insipiring articles. I come from uganda in East Africa. I work in a bank. I have some finance background. For all those years I have been in the bank I had failed to know which direction to take. I led a very stressful life. Iwas perpetually broke. I accidentaly came across your articles while in Italy for Masters program. Even with all these papers life was starting to look boring,stressing and meaningless. Imade adjustments immediately.I have noticed a very big change . I have taken control of my finances. stress wrinkles are no longer on my face. The way I look at life has totally changed. I have developed interest again in my job.I hope in the next few years I will have built agood base of savings and investments. This is the most important education I have got in the last 35 years I have been on earth!!.

September 7, 2010 at 8:16 pm
(2) Joshua Kennon says:

Grifas,

Thank you very much for your kind words. I appreciate them very much.

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