Ask Erica: Why Become Rich?

You — my readers — have been asking me some fabulous questions for a while now. Today starts the first in what I expect will be a fairly regular series I’m simply going to call “Ask Erica.” The first question in this series is surely on some of your minds — not about me, but about you. The question is: Why should you decide to become rich?

Three Steps To Help You Define “Rich”

Let’s take a few steps back first. I firmly believe that before you become rich, you have to decide to become rich. There are exceptions — lottery winners and inheritances being two notable ones — but those who do not know how to budget, save, and invest quickly find themselves back in the hole financially. So, in order to truly become rich and stay that way, you must first decide to become rich.

The second step involves figuring out where you are now financially. Rich people focus on net worth, not income, as an indicator of how financially successful they are. Net worth is simply your assets (house; car; belongings; investments; retirement accounts) minus your liabilities (mortgage; car payment; credit card or other debt.) It may take a bit of time to calculate your net worth, but it is worth your time to do so. Don’t be surprised if your net worth is actually negative — that’s not unusual, particularly if you are young.

Finally, once you know your current net worth, you can set specific goals for your net worth — as well as your income — in the future. For instance, one of my goals is to have $1 million in passive income a year by the time I am 30. “Passive income” can be defined in various ways. Investments that pay dividends or return income, royalties, and investment real estate properties are a few passive income vehicles.

I encourage you to set bigger goals than you immediately think you can achieve. If you set big goals and have a positive attitude about reaching them, you will find that doors open much more quickly for you.

Those are the basics of how to get rich. But why get rich?

You’ve Set Your Goals – Now What?

Up until last year, I figured my primary financial goal would just be to accumulate enough capital so that I could reach my goal of $1 million per year in passive income. $10 million invested at 10% interest is $1 million per year, so I used that as a nice round number to shoot for as my net worth goal.

It was actually a TV show that caused me to rethink this entire strategy — or, rather, set it as an initial goal and decide that I wanted to push it much farther. That TV show was a rebroadcast of Oprah’s Building a Dream: The Oprah Winfrey Leadership Academy. The story — and seeing the girls in South Africa with hope in their eyes, finally away from the devastating surroundings they grew up in — moved me to tears. I cried and cried, realizing the plight of these young girls, who were obviously intelligent, who were really no different from you and me other than the horrific circumstances they had grown up in.

Oprah spent $40 million to build those girls a school where they could live safely, be taught by top teachers, and have a real chance to change the world. With her money, she is leaving a legacy that will have a lasting impact on the world. She has figured out that her money and voice can be used as a platform to transform people’s lives. And watching her show (as I do on a regular basis), you can tell that she takes true joy in making others’ dreams come true.

The True Power of Becoming Rich – Help Alleviate Pain and Suffering

There is so much suffering in the world, and much of it is needless. You and I have the power to change lives. Why are we insistent on “playing it small” and earning “just enough” for ourselves?

I realized recently how much more meaning my life would have if I refused to “play it small” and instead embraced HUGE riches. It’s not about me. Sure, I will happily live in a nice house and drive a decent car. But what it comes down to, to me, is that becoming rich is not about me. If I “played it small”, had a net worth of $10 million, and left a few million to charity in my will, that might be interesting. But what if I could become a billionaire? What opportunities to change the world would come my way then? What sort of legacy could I live? How many lives could I save? How many people could I rescue from poverty?

Deciding What Your Legacy Will be

What would you do if you had the chance to “play it big” and donate millions to a cause of your choice? Would you start a school like Oprah did? Would you teach others how to grow crops, how to start businesses, or give them technology? Would you invest money into curing a disease? How could you make the lives of millions of people better?

Of course, I don’t mean to imply that making others’ lives better takes millions of dollars. But the point does hold — in general, the more money you have and are able to give, the higher impact you can make in the world. Being rich isn’t about greed and selfishness and spoiling yourself rotten — just like retirement isn’t about sipping pina coladas all day. (I imagine both of those would get boring pretty quickly!)

Instead, consider financial freedom and becoming rich as one way to leave a legacy that will always be remembered in the world — by helping out others in need and making big changes. Those who are less fortunate and who benefit from your philanthropy will always remember you — because you chose to play it big.

How do you plan to “play it big”? Please post your thoughts and ideas in the comments.