How to Invest Efficiently

Everyone wants to make money, and I’m no different. Once people have saved up a little bit of money, everyone wants to learn how to invest so that they can make money off of their own money. This is a good idea, and the thought is in the right place, but I think most people do not realize how to create true wealth.

The reason most billionaire (or even millionaire) investors are billionaires is not from investing. Investing is primarily used to maintain wealth (against inflation) and sometimes grow it. However, most people made their initial money via some other method.

Business is the way that most people make their initial money. You will not make much money working for someone else unless you are an actor, sports star, or some other type of celebrity, and that is not a realistic expectation for people reading this article.

If you do the math, even high paid jobs like Doctors and Lawyers do not lend themselves to making millions of dollars unless you are running your own practice (which, at the end of the day is running your own business). Even if you do make 200k a year as a doctor (which is a good median salary), you’ll be taxed for about 40% of that and only clear about 120,000 a year. When you figure in things like your mortgage on your house, cost of living, and student loan payments, its really not that much money left over.

Even if your spouse has a normal job (40k a year), that’s probably just enough money to pay for whatever their own expenses are (loans, debt, lifestyle, schooling, health care, etc). If you have kids, there is even less money left over.

Sure, you will have a comfortable lifestyle with a job like being a Doctor, but you’ll never be able to save that much money or make that much money off of your investments to be rich. You just won’t live enough years to see that come into fruition, and suffering your whole life just to be rich when you die doesn’t make much sense.

A doctor might be able to save 40k a year if they live like a normal family. Even if you invest very well and hit a 7-8% return on your investment each year, you’d be barely reaching the million dollar mark after 15 years of work. Given that most doctors don’t even start working until around age 30, you’d be 45 by the time you got your first million. Before you really became a multi-millionaire, it’d already be time to retire for you as you’d be pushing 70 years old, even if you did make good investments.

The truth is while learning how to invest sounds interesting in theory, you’re never going to be rich unless you can start a business to make enough money to make those initial investments.