In todays blogpost I would like to handle a topic which I am really into: How to get wealthy from nothing! Following my financial journey you might know, that I started below zero several years ago. And I also want to “retire”, meaning reaching financial freedom, by the end of 2025.
I am not really talking about it in my circle of friends and colleagues, but when I do there is always the same reaction:
Haha, good one. There is no way you will make it!
But, and that is the most important fact about, I know at least three people who made it. Therefore I want to figure out, what are the essentials of getting wealthy from nothing.
What is wealthy or rich today?
When the world is talking about rich, famous and wealthy we are often looking at celebreties, stars and CEOs of huge companies earning several millions per year. But are those people really what I want to compare with? To be honest I am bit more fundamental about defining wealth. Of course Jeff Bezos or Elon Musk might have several billions in their bank account, but for myself I am talking about my own reality.
I am aiming for the moment where I am able to cover my todays costs from my investments. If I am summing this up and putting some buffer on it, I guess the total of about 6.000 EUR per month is my current target (until 2025). Pretty easy to calculate:
- 2.000 EUR for the rent
- 1.500 EUR for household stuff
- 1.500 EUR for insurances, fees, etc.
- 1.000 EUR for fun things
If you calculate this amount into an annual total, we are talking about 72.000 EUR. Not taking taxes into account, but suggesting an annual interest rate of 4%, I need a total amount of 1,8M EUR. So, this is my personal “wealthy”. Yours might differ as your amounts for life differ. Suming it up there is no right or wrong as the amount is always indiviual AND it changes over the time.
In Germany we have an institute called “German Institute for Economic Research”. These guys have very intersting figurs within their studies where you can find out what is the TOP 10% for example in Germany. The amount: 275.770 EUR net assets is necessary to belong to the Top 10% in Germany. That sounds do-able, doesn’t it?
By the way, to become Top 1% you need 1,08M EUR here in Germany, which is more or less the amount I am aiming for. As these figures are calculated “per person” you need to split it by two for my wife and me.
Easy steps and hard work
I do not want to pretend to be wealthy by now. No way! I am just a regular dude on my financial journey blogging about it. However, those steps are the same to pay off your debt and built a financial base as for getting wealthy. The difference is mainly how hard you work for it. And to be honest there is a commong saying like “the rich are getting richer” – that is true. By focussing on a target and really putting the work in, you will make huge steps forward.
Those might seem small in the beginning. I mean saving 100 EUR per month will not make you rich or wealthy. But it is more about the mindset behind it. Try to save at least 10% and increase this amount a bit every month. Maybe you know my rule of interest: minimum 1 EUR more than last month!
When I paid off my debts three years ago I was happy saving 100 EUR each month. But when I finished paying them off I added this amount into my savings which nearly made it up to 1.000 EUR. Currently I am saving about 2.500 EUR each month. This looks like a wild ride from 100 EUR to 2.500 EUR but it is all about focus.
Whatever your goal is – you need to differ from the average. The average German has net assets of about 20k EUR. And that is what you will do if you are doing things like anyone else around you. So, check your thinking and behavior and stand out for what your are aiming.
#1 Built the right money mindset
Going on that journey you should know how to behave. Becoming wealthy and getting above the average you need to figure out for yourself to get uncomfortable. No one has ever become wealthy by doing nothing, also you are offered courses and webinars like that a lot. Try hard work – your chances for a success are ways bigger!
What does hard work means? Hard work means to do more than everyone around you. Improve your skills and get an expert in whatever you are doing. Do things others try to avoid. It is often called as the so called “extra mile”. But by going that extra mile you will stand out. You will become different and you will be recognized.
Additionally you need to improve your skills to ask for money and get into a good relationship with money. I don’t know what is right or wrong, buy in my case I see money as a tool. Every single Euro is a small part of my financial freedom. If I invest it at 4% interest rate this single Euro adds another four cents to my passive income per year.
If you hate money, don’t like it for whatever reason and try to avoid it, you will never be able to become wealthy. Know your value, increase your value and bring it to the market to make money out of it. The more uncomfortable things are (or get), the more money you will probably make.
#2 Make a plan
Usually we know it, but for any reason we are sometimes not taking it into concern when it comes down to money. Building a house requires a detailed plan. Making your Bachelor or Master degree needs a plan. Realizing this huge project at work forces you to make a plan. But why don’t we make a plan about our net assets and financial goals?
There is no reason for it. So go for it. And just write down what you are thinking about. If 5M EUR is the first thing to come into your mind just write it down. The most important thing is to have a plan and a goal. After you made those you start defining the details and your way to reach your goal. Wanting to have 5M EUR by the age of 60 requires a good discipline when starting in your 20s.
But is it possible? Of course!
You just need to save 815 EUR at the age of 20 per month and increase this amount by 5% every year – after 40 years you will hit 5M EUR. This is calculated with the common interest rate of an S&P500 investment of about 8% per year.
So maybe your plan extends a bit or you need to figure it out, but you will always be able to make a detailed plan about it. Therefore you of course need to know your numbers and put everything into it. Not knowing about your finances is like stumbling around in the dark trying to find the door. It won’t work! The more you put down on your paper, the better you know what to do and what you are capable of.
And now, follow and execute the plan!
#3 Work with your plan and live below your means
There are two ways to save money. Either you save it from your salary or you earn a little extra. The average person in Germany is saving about 16% from their salary. Wanting to hit your targets fast you need to do things the average person wouldn’t do – or can’t.
We often read or hear “Live below your means”. That does not say to live on a megasmall budget and sleeping in the back of your car. But get uncomfortable. When the average is saving 16%, try to double it. What do you have to do in your life to reach those 32% savings rate? What do you have to do to reach 50% or even 70%?
You can’t save 100% from your salary. That is somehow logical. Working on your skills and improving them will make you offering more value to the market. Imagine you are earning the average 2.000 EUR per month in Germany. Now invest time and money into your skills. This might be skills you need for your job or something your like during your free time. Now, after executing with those skills you will able to ask for a payrise (or change the employer in case it did not work out).
Let’s assume you are able to realize a payrise of 500 EUR. When you had nothing before to save, you are now able to save those 500 EUR. There are several ways to handle it. You might for example save 300 EUR into your investments and spent the rest for fun. You savingsrate spikes from 0% to 12%. If you save to whole payrise it will raise to 20%. Maybe you are able to increase your skills even more, write a blog, start a Youtube channel about it – whatever! Money will come to you and you will be able to increase you savingsrate by the amount you wish for.
The more you put in, the more will drop out! And if you use this money wisely and not spent it all into daily spendings, the more this way will become your personal turbobooster to reach your goal.
#4 Generate more money from multiple income streams
As I already mentioned you can’t save 100% of your income. And the other way around your savingsamount is limited to this 100% minus X of your salary. Why not boost your salary?
Improve your skills, ask for a payrise, improve again and get an expert in your niche. This will pay you a lot of money. But while a lot of people are just thinking about improving their skills at work only a few think outside the box. You do not need to always improve your skills. There is also the possibility to “recycle” your knowledge.
What do I mean with “recycling”?
Let’s assume you are really into the topic of kickboxing – please do not ask how I find this topic. I was just randomly as I wanted to chose something I am absolutely not into to show you the possibilities. So, you re the highest skilled kickboxer giving training at a good price. But your daily time is limited.
Therefore think about recycling your knowledge. How about writing a book? What about producing a podcast? Maybe start an affiliate page for dressing stuff or kickboxing studios? Maybe develop an own brand of clothing and accesoirs?
With any of these random ideas you will be able to earn some additional money. Think about investing 2-3 hours per week in one of these ideas and establishing something, what pays you money. And afterwards your focus on it or choose the next idea trying to earn money from it.
It is that simple. There are a ton of chances anyone, I really mean anyone might grab and reach out for. The more sources of income your have the less depend you will get from a single one.
#5 Invest your money wisely
The moment you decide to invest your money is the moment you need to have a big investment goal. You might either invest with a low risk or a high risk. For me only the lower risks are working. Of course I am investing into P2P lending, which is a high risk sector. But most of my money goes into ETFs and dividend aristocrats.
Right in the beginning of this blogpost I mentioned I am only looking on what my investment will make me in the future. Every Euro is worth four Euro-Cent every year for the rest of my life (and beyond that). So I would better take the four Euro-Cent with a calculated risk than six or eight Euro-Cent with only a chance of 50%.
I am working on my future – just like you should. You might also turn things around and think about a 100 Euro investment calculated in time: How much time do you have to work to earn another 100 Euro net? That is your risk. Do you really want to put your time at risk?
Everyone might have a separate idea on it, but I decided for myself to take smaller steps over the time, which will ad up to a huge step.
Bit by bit, step by step, day by day
I really love those quotes where huge goals are divided into smaller goals, which might work for a week of less. Of course my goal of 1.8M EUR is huge and I am not that far on my way, like you might think. But I absolutely believe in the power of compound and paying off at the end.
Just to give you an example: When I started I bought dividend shares at an ordersize of 500 EUR. The transaction costs were about 10 EUR. So it is a share of 2% of my total investment. At that moment I bought the shares I was down at least 2% with my investment.
About one year later I bought my first dividend shares with an ordersize of 1.000 EUR. But the transaction costs remain mainly the same at 10,50 EUR. But the share of costs on my investment dropped from 2% down to 1,05%.
If you invest 100 EUR every month into for example Bondora Go and Grow this makes you another 0,56 EUR per month until the end of your life. After your first year you already established a cashflow of 12 x 0,56 EUR per month with your investment.
Do not get annoyed from the small size of your investment at the beginning. It will add up. Time is on your side and it will work for you. Once you recognized that AND additionally max out your income your money will work 24/7 as hard for your financial goal as you do.
Does that sound good or what?
Step by step guide on How to get wealthy from nothing
Summing everything up the way seems pretty hard. And it is – or will be for sure. But it is worth any work. From my point of view I can tell you: It feels amazing!
- The feeling to not have any debt – amazing
- The safety to know about your emergency fund – awesome
- But the best: Knowing your money works for you – absolutely incredible!
This is easy to read and maybe I was able to fire you a bit up. But now your task is to get things done. Work on those Top #5 of How to get wealthy from nothing and your story will be another successtory. As only a few people are where you want to be you need to get comfortable with doing things all the others don’t want to do.
Get comfortable with getting uncomfortable
Here is once again the short overview we ve talked about in this blogpost:
- Built the right money mindset
- Make a plan
- Work with your plan and live below your means
- Generate more money from multiple income streams
- Invest your money wisely
The harder you want your goal the more you will put in the work. And that is the only secret. When I look up to those who are already where I want to be, their way was just hard and disciplined work. A lot of. That maybe does not mean to work 20+ hours per day – but let’s try to make it 12 – 14.
Every experienced it? Let’s get on that journey together and comment below what your are working on.