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How to Get Rich in Five Years or Less, Part IIBy
Thursday, March 6, 2014
My friend Dean wants to get rich...
Yesterday, I shared Dean's story... He's not looking to become "billionaire rich." He just wants freedom. He wants to be rich enough to afford to live where he wants, to spend his days doing something he enjoys, and to not worry about money.
The first step Dean took was to quit a government job. The money wasn't bad... but the work was boring, and there was no real "upside" to his current position. So he switched careers... He joined a business that gives him much more freedom and a better shot of getting rich by his definition.
Today, I'll share the second idea that will help Dean achieve his goal.
It's one of the greatest secrets of building wealth... and when you apply it to your career, it's one of the fastest ways to increase your net worth...
The wealth-building secret I'm talking about is "compounding."
When it comes to your investments, that means reinvesting the income you earn. So if you own a stock paying a dividend, you use your dividends to buy more shares. Then those shares earn dividends... which you can use to buy more shares.
It's a "snowball" effect. It starts small. But with each new layer, it grows exponentially bigger. Eventually, you're earning multiples of your original investment.
You can do the same thing with your job. My friend and colleague Mark Ford explained it best in an interview he gave a few years back...
You can find the full interview – which is great reading – for free right here. The important part for my friend Dean is where Mark explains how to start earning raises in the 10% range...
It takes two steps:
1. You have to start doing more valuable work.
According to Mark, that means one thing: producing long-term profits. Even if your job isn't in sales, you need to do everything you can to make sure you're contributing to the company's bottom line.
As Mark says, you need to "transform the work you are doing now in such a way that it will produce those long-term profits. The better you can do it, the more money you will make. It's as simple as that."
Dean is in a position where he can use his work to directly increase sales. If he gets good at that, he'll be well-rewarded.
2. You need to make sure the folks who can give you a big, 10%-plus raise know that you're worth it.
The way to do this is to become indispensable. Mark says to make a list of things you can do to increase your value to your boss. Then start working through the list, one by one.
Eventually, your boss will start assigning you more responsibility. And according to Mark, "he will see you as an entirely different and more important employee than any of the others he deals with." Dean just moved to a remote tropical island, thousands of miles away from his business' headquarters... So he's going to have to put in extra effort to make sure his boss and his boss' boss know what he's up to. But that effort will be worth it if he gets a 10% raise this year... and maybe another one the year after that.
If he can increase profits and make himself valuable, his salary could double in five years. That'll put him well over his old government salary... and there will still be plenty of upside left.
A much higher salary will make it easier for Dean to live the lifestyle he wants without worrying about money. But there's still one more step he'll need to take before he can count himself truly "rich"...
In tomorrow's essay, I'll share the final piece of the puzzle...
It's an idea that will help Dean sleep better at night... and eventually give him the ultimate freedom to do what he wants, when he wants.
Regards,
Amber Lee Mason
Further Reading:
"When it comes to compounding serious wealth in the stock market," Bryan Beach writes, "there really are no shortcuts." He says you must buy outstanding businesses... You must buy them at good prices... And you must reinvest your dividends. See what happens when you follow this formula here: How to Safely Double Your Returns Without Any Extra Effort.
The No. 1 objection Porter Stansberry gets when telling readers about the compounding strategy is: "That's great, Porter. Wish I'd known about that when I was 25. But it's too late for me now. I don't have 30 years." But Porter says "that's nonsense." Find out why here.
Market NotesOUR 'BASICS' STRATEGY PAYS OFF AGAIN Today's chart is a reminder that you can make a fortune in companies that sell "the basics."
Novice investors often assume they need to invest in risky, high-tech companies to make big gains. They couldn't be more wrong. The truth is... you can make a fortune in companies that sell things like beer, cigarettes, chocolate bars, and even auto parts. "Boring" products like these enjoy steady demand... and there's scant risk that technology will make having a beer after work obsolete.
The latest big winner for our "basics" approach is Constellation Brands (STZ). Constellation is the No. 1 producer of premium wines in the world. It owns a portfolio of more than 100 different brands like Robert Mondavi and Clos du Bois. The company is a longtime favorite of our colleague Dan Ferris, who calls it the "World Dominator of premium wines." It's the type of company that has major advantages over competitors, stable cash flows, and offers shareholders a "worry-free" way to safely compound wealth in the stock market.
As you can see below, Constellation is generating huge returns for investors. The stock touched a new all-time high last week. It's the latest proof that you can make huge money in the basics.
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