This post may contain affiliate links. FinanceSuperhero only recommends products we know and trust ourselves.
My uncle loves to tell the story of his friend from church. This man was unassuming – he worked a blue-collar job as a machinist in town and remained with that company throughout his entire working career until he retired in his sixties. His wife never worked – they felt it would be more valuable for her to remain home and raise their children. Last year, this old man passed away, and his wife followed just a few months later. They had been married for more than 50 years and still lived in the tiny home which they had purchased shortly after getting married. And nobody knew that they had discovered the easy way to become rich.
The machinist and his wife were a model of frugality. They owned only one vehicle and preferred to drive well-maintained used cars. My uncle couldn’t recall a time in which the couple owned a vehicle newer than five years old. A true story-teller, my uncle saved the best for last in the tale of his friend, and what he told me was most-unexpected:
The elderly gentleman and his wife had amassed a nest egg worth over $1 million and willed half of their estate to the church.
You may know a similar couple. I know a few, too, and their secret is simpler than you may think.
THE SHOCKINGLY EASY WAY TO BECOME RICH SLOWLY
In The Millionaire Next Door, the late Thomas Stanley identified the common traits of PAWs, or Prodigious Accumulators of Wealth. My uncle’s friend was a PAW. He spent far less than he earned for several decades, avoided spending money on status symbols, and did not tie up his money in depreciating assets.
Some financial experts say that personal finance is 80 percent behavioral and 20 percent head knowledge. I believe that the simple approach of the machinist illustrates this principle very well. In fact, if we could interview the gentleman today, he would probably attribute his success to common sense, basic arithmetic, and compound interest.
I believe he would also talk about two very important numbers.
THE TWO MOST IMPORTANT NUMBERS TO WINNING WITH MONEY
As my uncle’s friend knew, the biggest elements contributing to financial success are not fees, return on investment, tax savings, or even time in the market. The most important factors are numbers: net income and net expenses.
The easy way to become rich is to increase the difference between these two numbers. Most financial experts call this “the gap.” How you do that is up to you. You can choose to increase your income by seeking a new job, asking for a raise, or starting a profitable side hustle. Or you can cut out wasteful expenses that do little to increase your happiness.
I will always remember the day that I read how simple it is to become wealthy. I calculated that I could retire after working only 22 years if I simply saved 40 percent of my net income. Even better, if I could save 75 percent of my net income I could retire in approximately 7 years. That short and sweet article from Mr. Money Mustache redefined my vision of what a reasonable retirement timetable looked like for me and my wife. Suddenly, working until 65 only seemed acceptable to me if it was by choice.
GROWING MY GAP
Our plan to grow our gap is constantly evolving. My wife and I do not yet have children, so our current plan is focused on growing our income as much as possible. We both are full-time public school music teachers. After school, my wife teaches piano, flute, and voice lessons in her private music studio. She built her business from the ground up. I am a realtor 24/7 and 365. Sometimes that means I work early hours before school, during my lunch break, in the few spare seconds that most teachers run to the restroom, and all other hours that my clients need me. Somewhere in between, I make time to write 2-3 articles per week on this site. My wife and I do all of this because we sincerely love helping other people grow and find solutions to their problems.
Maybe increasing your income is the best way for you to grow your gap. Maybe you’re wasting money buying things that you don’t really want to impress people you don’t even like. If you’re married, maybe you and your spouse aren’t on the same page financially speaking. In that case, a zero-based budget may be exactly what you need to turn the corner and begin saving more money.
GROW YOUR GAP
By now, I hope you believe that the shockingly easy way to become rich isn’t so shocking after all. It is largely built upon common sense. The problem is that everything in today’s world flies in the face of common sense. We are constantly told to spend more, live for today, and seize the moment. This is one of the biggest lies marketers have ever gotten away with telling – they have softened our sensibilities and led us to believe that we’ll always find a way to make it all work as long as we can pay our minimum payments.
The only way to become wealthy and live the life you desperately desire is to drown out the noise, roll up your sleeves, and get to work. Imagine what life would be like if you had no debt? What if you had a paid-for home? What if you had six months of living expenses in the bank? What if you never needed to trade your time for money ever again?
Those are the questions that keep me motivated on the tough days.
What motivates you?
RECOMMENDED TOOLS TO MONITOR AND GROW YOUR GAP
Personal Capital is the best tool to keep track of all of your liabilities (debts) and assets in one central location. With a few clicks, you can monitor your net worth picture and also dive into specific performance of your investments. I check my account a few times each week using the Personal Capital app. You can sign up for FREE using this link!
Today’s technological advances have made investing easier than ever before. Betterment is better than your average robo-adviser. Whether you are a beginning investor or a seasoned do-it-yourself-investor, Betterment can help you achieve optimal returns based on your risk preferences. Through a combination of lower fees, smarter behavior, diversification, and automated rebalancing, Betterment can help your out earn the typical DIY investor by 2.9%. You can roll over an existing 401k or IRA or open a new IRA in minutes.
My favorite tool to grow the gap, Digit, isn’t an investing tool and it alone won’t make you rich. But its algorithms will transfer money from your checking account to a Digit savings account and ensure that you don’t have easy opportunities to waste money. You can pause savings and transfer money back to your checking account at any time. Sign up for free here.
And if you’re looking to increase your income, consider driving for Uber. My friend is a school band teacher and earns a good salary. He takes advantage of his spare evenings and weekends and drives for Uber. He meets interesting people and often earns over $500 per week. If you enjoy driving and want to tap into the unlimited earning potential of Uber, Uber.
Ryan - JustAnotherDollar saysMarch 3, 2017 at 9:33 AM
Great post! The biggest thing I’ve seen that holds people back is car debt and lifestyle choices. Deciding not to keep up with the ‘average American-dream’ is the first step to becoming financially free.
Our plan is to continue growing our gap until we’re debt free and have a paid-off house (or income property). We’re almost to 60% of our income going toward debt/savings at this point, so this stage will go pretty quickly. I think we’ll re-evaluate at that point to decide how wealthy we really need to be to be happy and secure. My retirement goal was always 55, but I’m really starting to like the sound of 40 instead.. Time to make a plan and make it happen! See you around.
Hero saysMarch 5, 2017 at 7:19 PM
Thanks, Ryan. Car debt and inflated style alone can eliminate any gap that exists for most folks.
A 60% savings rate is a tremendous accomplishment. Mathematically speaking, you’ll easily eclipse your goal of 55 and most likely 40 if all goes to plan. I wish more people knew that it was possible to escape the rat race earlier than 65.
Mrs. Picky Pincher saysMarch 3, 2017 at 12:01 PM
I could see how most “financial” decisions aren’t based on hard numbers at all. In fact, I’m HORRIBLE with all things numbers and I still manage to do pretty well in the whole FIRE game. 🙂
But yes, automating your money wherever it makes sense for you is a fantastic approach to build wealth over the long term.
Mrs. Groovy saysMarch 5, 2017 at 6:41 PM
It’s all common sense, but not very common. It’s great that you and your wife are on the same page. To me that’s the most important financial component of a marriage. You’re certainly maximizing your earnings potential, which no doubt, will speed up your path to FI.
Hero saysMarch 5, 2017 at 7:12 PM
That’s the truth, Mrs. Groovy. I suppose if more folks exercised common sense we wouldn’t have as much to write about. You and Mr. Groovy are another example of the power of what can happen when spouses share the same ideals.