Buy Like Buffett

The goal for most people is to one day become a millionaire. Becoming a millionaire is not as difficult as you think. You just need to acquire a net worth of $1 million dollars. This means that the value of all of your assets together minus your liabilities should be equal to $1 million dollars.

Here are 5 steps that will put you on the road to becoming a millionaire.

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I posed the following question to 10 different people. “How much money would you need to have to consider yourself rich?” I wanted to get different peoples responses as to how they would describe wealth. The answers varied dramatically.

Here are some of the responses.

- 6 people said $1 million dollars is a sign of wealth.

- 1 person said $2-3 million dollars.

- 1 person said $5 million dollars.

- 1 person said $50 million dollars

- 1 person said enough money that they were financially comfortable. (bills paid, not stressing over money)

I have always thought about wealth in numerical terms. My personal goal for wealth has always been to acquire $1 billion dollars over a 25 year time period. Why such a lofty goal? My thinking was always that even if I fall short of the goal, I would be quite happy with $200 or $250 million dollars. However, the last response caused me to rethink my position. Being rich is about more than just acquiring a bunch of money. Don’t get me wrong, it would be nice to be a billionaire but it is not all that matters. You should consider yourself financially rich if you live a comfortable lifestyle. Being rich is about financial peace. You no longer have to stress over mortgage payments, car notes, and college loans. You aren’t working yourself to death 50-60 hours a week just to make ends meet. You should have some time to enjoy your life. You cannot put a price on this kind of financial peace.

The main impetus for acquiring wealth is to improve lives. Once you have acquired significant financial resources then you can give back. You can help family, friends, charities, and the less fortunate. Remember the goal is to not just simply acquire money but to give back and help someone else. So, if you haven’t achieved all of your financial goals just yet, don’t stress out. Stick to your plan and remember that if you have a loving family and friends, you are already rich!

Photos by: AMagill

I was reading Forbes magazines list of the richest people in the world to learn how each individual amassed great sums of wealth. I discovered that most of the billionaires listed fit into one of five categories. I call these categories the 5 I’s. Below is a list of the most common categories that have lead to wealth.

1) Innovators – These are the people that develop a new way of doing things. You don’t have to come up with the next great idea, just improve upon an existing one. Steve Jobs of Apple is one of the great innovators. From the ipod to the iphone to the imac, Apple is always on the cutting edge of innovation.

2) Inventors – These are the creators of a new good or service. You just have to see a need for a product that others do not see. James Dyson became a billionaire by developing the bagless vacuum cleaner. His idea was initially rejected because it was seen as hurting vacuum bag sales. Today the dyson vacuum is an international best seller.

3) Inheritors – This is the easiest path to wealth. You need rich relatives for this one though! Ask Jim Walton, S Robson Walton, Alice Walton and Christy Walton who are the 4th, 5th, 6th and 7th richest Americans. They are the heirs of the Walmart fortune.

4) Investors – Investors commit money to an endeavor with the expectation of profit. This can be through saving or purchasing an asset for capital gains. Warren Buffett has built his fortune through stock investing. Donald Trump made his billions by investing in real estate. Jerry Jones got rich in oil and gas exploration.

5) Entrepreneurs – Entrepreneurs are the risk takers that start and manage a business. Entrepreneurship can take many forms from purchasing a franchise to creating a start up. Bill Gates of Microsoft and Larry Ellison of Oracle grew small technology firms into the world’s largest software companies. Oprah Winfrey began her career in local news and is now the CEO of a media empire.

I know. I know. Entrepreneurship doesn’t start with the letter I. But the 5 I’s sound a lot better than 4 I’s and an E.