How to go from poor to rich in a year; is it possible? In this post, I will share the 7 steps I have used to develop the mindset for financial success.
Wondering how you can accumulate wealth and become rich? Well, you aren’t alone. Many of us dream about becoming the next Bill Gates or Elon Musk; however, accomplishing that level of success is not easy. But it’s not impossible either.
In reality anyone can become rich. Although getting there takes a combination of courage, knowledge, effort, skillful decision making, and a little bit of perseverance.
There’s no one surefire way to make you wealthy overnight, but there are some proven ways that can help you build wealth in the long-term.
In my post how to become wealthy in 5 years, I explain why you should focus on becoming wealthy instead of rich.
In this post, I’ll be sharing with you the right steps to set yourself on a path that leads to financial freedom and sustainable wealth.
Let’s get started. Here’s how to go from poor to rich in a year:
1. Commit to Becoming Rich
I hate to break it to you, but the desire to become rich without committing to it is certainly not going to work. You need to stop treating getting rich as a hobby and be prepared to make hard decisions.
Once you start following this path, you have to fully devote to your plan and believe that you can do it; because it’s possible and you deserve success.
There’s no room for giving up or failure. You should be ready to give whatever it takes for as long as it takes to achieve wealth.
2. Financial Education
Investing in your financial education is a fundamental step towards building wealth. You don’t need to go to college or spend a fortune to learn about money.
There’s no standard program to teach you about personal finance, but there a few great ways to go about it.
I’d recommend you take the time to read personal finance books & resources. Here are a few recommendations:
- 5 Minute Millionaire Mentor
- The Total Money Makeover by Dave Ramsey
- I Will Teach You To Be Rich
These are handy books to kick start your learning journey. There are also great online courses and podcasts to listen to and improve your financial literacy in regard to basic topics like budgeting, debt, saving, and investing.
Don’t just follow one resource or finance expert. The best way to learn is to take in enough information so that you can form your own opinion.
The author of the book Rich Dad, Poor Dad — Robert Kiyosaki, says there are 3 sides to a coin; not the 2 sides as many people know (the edge of the coin represents the third side).
Instead of simply sticking to advice from one teacher or expert, a smart person will stand on the edge of the coin to see what the other side has to offer.
3. Cut back unnecessary expenses and live frugally
Adopting a more frugal life is something I recommend. Frugality means being economical with your money and avoiding lavish or unnecessary spending.
Start by accounting for every dollar you spend each day simply by setting a budget. It helps if you stay within your spending limits. Being disciplined can prevent you from making impulse purchases when you go out shopping.
If you are having trouble tracking your daily expenditure, take advantage of expense tracker apps. Another practical option is to use Excel spreadsheets.
At the end of the day, you can review your spending and see what doesn’t make sense. Here are a few more tips to reduce your expenses:
Cut back on lifestyle expenses
Let’s assume you’re the type of person who enjoys going out for food and drinks most days of the week.
It’s a good idea to start cooking more at your home. This change can help you to avoid the high prices of eating out at restaurants.
By eating more at home, you can help to cut your monthly expenses by an average of $200. That’s a saving of $2,400 in a year!
Lower your energy bills
There are several ways to save on your utility bills. For example, you can install a smart meter, energy-efficient bulbs, and insulating your home if you haven’t done it already.
A smart home meter can help you make better energy choices and control your bills. It gives you accurate real-time information on your overall energy consumption.
Since the device can be programmed to shut off when not needed, it can prevent your electrical appliances from running and wasting energy.
Insulating your home can prevent the loss of heat through walls, roofs, windows, floors, and doors. With proper insulation, it becomes easier to meet the heating and cooling needs without your system running longer.
Avoid expensive premium brands
As a consumer, you have some lower-cost brands out there offering quality products that can meet and even exceed your expectations. Keep in mind expensive products do not always translate to ultimate superior quality.
Don’t be afraid to try out the slightly cheaper brand and compare your satisfaction. You’re likely to notice no significant difference except in your savings.
4. Clear any debts first
Debt can get in your way of getting rich, especially if you have different loans with high-interest rates. Debt simply borrows from your future income. And, it may encourage you to keep on spending more than you can afford.
If your debt doesn’t have future value, then that’s considered a bad debt. And the best thing to do is to pay it off.
A good example of bad debt you should clear first is credit card debt. Credit card debt has a stronger risk on your finances because it compounds way faster than your best investments ever could.
In other words, you’re likely to have a debt load that outweighs your earning capacity and ability to pay it off.
Getting out of debt may seem easier said than done if your finances are already stretched.
The good news is that there are practical ways to reduce your expensive debts. First of all, the money you save from becoming more frugal, can be used to pay down your debt.
Secondly, you can always look into debt consolidation or debt refinancing.
With the debt consolidation option, you can turn your expensive student loans, credit card debt, and personal loans into a single manageable debt.
Debt refinancing involves taking out a loan with more favorable terms and conditions to replace your existing expensive debt.
This can save you a significant amount of money on interest rates. You can use your savings to make more than the minimum payment so that you pay down the debt sooner.
Remember, I’m not a financial advisor. I’m just sharing what I would do. When it comes to debt, its always best to seek professional financial advice from an expert.
When you become debt-free, you’ll instantly feel like a weight has been lifted from your shoulders. It’s now time to make some money.
Watch the video below for more tips on how to pay off debt fast.
5. Treat your money like a rich person
Mega-successful people have a financial growth mindset. They focus on spending money on profitable opportunities.
Wealthy people are more open to exploring new ideas because they believe there’s always more money to be generated. Also, they are not easily carried away by instant gratification.
I’d like to make a simple suggestion. Be frugal on purchases that depreciate in value or don’t produce income. Buy assets and avoid or reduce liabilities.
For example, spend frugally on things like cars, home appliances, entertainment items, computers, smartphones, and clothes depreciate quite rapidly.
I’m not going to tell you to avoid these things entirely, but it pays off when you practice conscious spending. The rich wouldn’t stay rich if they always spend mindlessly.
Learn to take full control of your finances. As I mentioned earlier in this post, you need to prepare a budget and pay attention to your spending so you know where your money goes.
Automating your finances can take away the stress of managing your money effectively without leaving anything out. When you receive your paycheck, the money is sent to where it is supposed to.
Your bills will be paid on time and money put away in your savings account without you even lifting a finger. Also, you’ll know if you have some income left over to spend guilt-free.
You can always tweak the automated system to work best for you.
Here a are a few example of how automating your money works:
- Contribute 10% of salary to your 401k and Roth IRA plan.
- Save 5% of salary for things like wedding, vacation, and down payment on a house
- Use 50%-60% of salary to pay regular and miscellaneous bills (rent, utilities, debt, gym, Netflix, etc.)
- Spend 20%-35% of salary on what makes you happy guilt-free
Suggest Read: How to start saving money when you have none
6. Invest your money
That’s right, it’s time to invest your money. Investing is a smart way to grow your finances and get rich.
It’s important to remember that investments do involve some kind of risk. Therefore, you have to choose your investments wisely. One bad investment mistake can be very costly.
Below are a few great suggestions you may want to consider.
Invest in stocks, shares and mutual funds
When you invest in stocks, you become a shareholder of a corporation. You’re entitled to be part of the earnings and assets of that corporation. As a shareholder, you can make money through dividend payment or by selling your shares.
Investing in stocks can help you build wealth if you make steady investments over a long period.
The average annual return is estimated to be 7%. This means your initial investment in the stock market will double ten years.
It’s good to keep in mind stocks can go either way. So before buying your first stock and putting it on autopilot, at least make sure you’ve mastered the fundamentals of stock investing.
Stocks carry more risk than mutual funds. With mutual funds, you can diversify your assets.
It can consist of a mix of stocks and bonds or 100% stocks that are not entirely of one corporation.
If the unthinkable happens and stock prices decline significantly, you won’t be hit hard like you would if you only invested in individual stocks.
Invest in real estate
In my humble opinion real estate is one of the safest investments to accumulate wealth.
However, it typically requires high initial capital that you may not be able to raise as for now.
If you already have enough money saved, don’t waste more time. Research the best areas where to put your investment.
Whether you’re buying, developing, or selling real estate properties, the rewards are certainly encouraging.
Invest in businesses
Business is a broad subject. While there are hundreds of business options, it’s advisable to invest money in a business centered on your skills, hobbies, interests, and talents to increase your chances of success.
Put simply, you should focus on a type of business you would love spending time on even when things aren’t as swift as you anticipated.
7. Build multiple streams of income
Diversifying sources of income should be part of your get-rich plan. You don’t necessarily need to quit your job to start a business. And without further ado, let me show you how to go about it.
Start a blog
It easy to create a blog and you can work from anywhere. Just like most methods, a blog won’t make you rich fast. However, a blog is a great way of creating a new stream of income.
It takes time to reap the benefits, but in my opinion, its worth it!
When starting a blog, I’d recommend venturing into something you’re passionate about. For example, if you love cooking food, you could start a food blog to share different recipes with people.
To earn money from your blog, you’ll need to monetize it. You can do affiliate marketing, email marketing, securing sponsorship, selling eBooks and online courses, etc.
I picked out affiliate marketing because it’s my favorite way to earn extra money online. It’s arguably the easiest and effective option.
Basically, you promote someone else’s products through your blog or website. For example, you could do product reviews for potential customers. If the buyer makes a purchase, you get a commission.
The beauty of affiliate marketing is that most of the programs are free to join. And with so many companies offering different types of products to choose from, it’s easy to find something you’re passionate about.
Selling physical products can also create an additional income stream. All you need to do is find a manufacturer to work with and then work on optimizing your listing online. You can sell common products, which people tend to order frequently.
The video below will provide you with even more great ideas for income streams.
The final word
While accumulating wealth can be a rewarding and satisfying undertaking, don’t forget about the more important things in your life. Who wants to become a multimillionaire or billionaire only to end up lonely and in poor health?
Also, I always think it’s best to avoid the get rich quick schemes, such as multi-level marketing (MLM) business. People have become rich through winning lotteries, but striking gold may be an impossible dream for many of us.
Building wealth takes dedication and patience. The chances of you becoming a millionaire overnight are slim; but if you follow these 7 easy steps, you soon develop a rich person mindset. And, that’s how to go from poor to rich in a year.
Thank you for taking the time to read this post. Feel free to leave a comment and I’ll get back to you as soon as I can.