Being Rich: The American Dream or a Paradoxical Scam?

Everyone wants to be rich. Whether it’s to support themselves, to give back to their families, or to impress their friends, being rich is something that is sought after by all. Few people, however, sit down and actually think about what they want for their future and what they are really chasing. What exactly is “rich”, and is it really all it’s hyped up to be?

Imagine this: you are a senior executive of a wildly successful company and have a yearly salary of $1,000,000; you own a mansion by the beach with an indoor pool, 3 Lamborghinis, and have a membership to one of the best golf courses in the country. You’re rich! Right?…… well maybe, but what if I told you that the mortgage payments on the mansion were $450,000 per year, utility fees to keep the house running and pool warm was $300,000 per year, car payments totalled $200,000 per year, and annual membership fees to the course was $100,000?

You would be $50,000 in debt at the end of the year. And that’s not counting taxes, food, transportation, and any other luxuries you might want to have. Furthermore, the instant you stop working, you stop receiving paychecks: you are essentially locked into your job. Still feel rich?

Now imagine this: you don't work at a large company, in fact, you don't work at all: you're unemployed by most senses of the word. However, you DO own three rental properties and a few vending machines that bring you around $90,000 in tax-free passive income into your bank-account every year. You live in a suburb far away from the city in a modest house which you paid for in cash, you drive a Hyundai, and spend your days doing things that interest you and make you happy. Are you rich?

The Twisted System

schools teach you that rich people own things
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I don't know about you, but I want my life to be the latter. Unfortunately, society teaches us that being rich is about the stuff that you own. This leads to a mindset where you make money to buy stuff you can't afford. Get promotions. Buy more stuff you can't afford. And the cycle repeats. This is the “rat race.”

School teaches us that the harder you work, the bigger the paycheck. “Go to a good university, take out a student-loan, and get a good job so you can have a great salary.” Great motives and seems legit enough, but I have never once heard any teacher talk about how to build passive income streams.

Big salaries are great, but when you stop working, you stop getting them. This means that the education system is either teaching kids to work and make more money until they die, or to work for a company that will take care of them in retirement. Unfortunately, fewer and fewer companies are offering pension plans. So schools are teaching the majority of students to work until they die.

What is the motivation then? Getting rich! “Get a good job so you can make lots of money and own lots of stuff and be rich!” But, without financial education, prioritizing possessions is a path to certain financial doom.

Don't Strive for Richness, Strive for Wealthiness

richness comes from saving and investing
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So what do you do? How do you break free of the system?

Well, you find ways to make money while you sleep. This is passive income and this is what sets you free. If fancy cars and mansions make you rich, then passive income makes you wealthy. (and with enough wealth the cars and mansions will come.)

Passive income might sound like a fairy tale, but there are actually many forms of it. To list a few:

  1. Dividend income
  2. Rental income
  3. Business

Financial Samurai gets into it much more in this post here, but my take on it is that dividend income is the easiest but with the lowest return, rental income is harder but with more returns, and true passive business income is the hardest but with the highest return.

How to Make Money While You Sleep

Dividend Income comes from investing in stocks or ETFs. This is by far the easiest form of passive income because you literally buy a stock from a company that pays dividends and get paid on a (usually) quarterly basis. The only downside is that typically returns on your money are in the 2%-4% range per year, so not a whole lot.

Rental Income comes from owning investment buildings and renting them out. This definitely takes more money to start than dividend income, but depending on your down payment, the returns could be very big! The downside is that not everyone is cut out to be a landlord as it can be extremely stressful and tiring at times.

Business Income is the holy grail of passive income if done right. True business income is when you build a business once, and it generates passive income for you forever. Especially in today's online day and age, it is possible to start an online business with little to no money and grow it to a size where it consistently generates passive income. However, no matter what industry, any successful business will require an immense amount of time and energy to get off the ground.

Of course, there are many more ways to potentially make money like crypto or investing in a lottery or joining MLMs (read: pyramid schemes), but the three above are the most tried and true. There will still be people trying to swindle you when you gun for the 3 passive income types above, but at least they are the most legit kind.

How to Start Your Journey To Financial Freedom

  1. The first step is to change your perspective. Be true to yourself and do NOT get caught up in the societal norms of idolizing possessions.
  2. Then, start saving! Save as much as you can so you can start building passive income.
  3. Spend a little time reflecting. Look deep inside yourself and figure out which form of passive income is the best suited for your personality.
  4. Do more research about that specific kind of passive income.
  5. Start building your portfolio! The last step is to act!
  6. Stay consistent. Remember, no matter what you choose, the best path to success is to stay on track and keep pushing.

If you prioritize building passive income as opposed to acquiring possessions, you are on the right track to financial freedom. So what are you waiting for? Start building those passive income streams now!

Thanks for reading through this post regarding how to get rich and thank you for following along! If you’re a Canadian Student, check out the Ultimate Canadian Student’s Guide to Personal Finance! To learn more about me, head over to this link here. If you want to get exclusive updates and tips, drop your email in the “get updates” box (might have to scroll up a bit.) Let me know your thoughts and suggestions in the comments!

Jeff is a current Harvard student and author of the blog Financial Pupil who is passionate about learning, living, and sharing all things personal finance-related. He has experience working in the financial industry and enjoys the pursuit of financial freedom. Outside of blogging, he loves to cook, read, and golf in his spare time.