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You don’t need an inheritance or a lucky lottery ticket to get rich from nothing. In fact, there are many ways to build wealth, and the first step is to say that you’re ready to change your financial situation and put in the work required to do so.
With 80-90% of all millionaires being first-generation millionaires, it makes sense that there’s something that rich people are doing that others are not. So, you have to ask yourself, how can you get into the millionaire mindset and get yourself from where you are to a more rich life?
In this article, we’ll go over how to get rich from nothing, however, keep in mind that we’re not going to talk about getting rich quick because getting rich quick often happens by luck, such as winning the lottery or getting an inheritance, such as a rich relative passing away. Instead, we’ll go over how a typical person can get rich through hard work and having their money work for them.
Before we get into it, let’s go over what it means to be rich, as the definition differs from person to person.
- What Does It Mean To Be Rich
- Get Into a Rich Mindset
- Create SMART Financial Goals
- Create a Budget and Track Your Spending
- Live Frugally and Below Your Means
- Track Your Net Worth and Increase It
- Automate Your Finances
- Start Investing As Soon As Possible
- Invest in the Stock Market
- Invest in Real Estate
- Invest in Peer-to-Peer Lending
- Never Stop Learning
- Create Multiple Sources of Income
- Create Passive Income
- How to Get Started When You Have Nothing
- Start a Business
- Business Ideas to Help You Build Wealth
- How to Fund a Business
- Work Your Way Up at Work
- Change Jobs To Make More Money
- Get Out Of Debt
- Don’t Keep Up With The Joneses
- Do More of What Works and Less of What Doesn’t
- Wrapping It Up
What Does It Mean To Be Rich
Being rich is a relative term as it pertains to what you personally believe it means and what a rich life would be like for you.
For example, you might believe being rich is when you are no longer required to work and can live off of your investments forever. On the other hand, you might think being rich is when you can afford a big house, a nice car, private schooling for your children, and twice-yearly vacations.
The point is that being rich takes on whatever meaning you want it to have. There’s no right or wrong answer here. For this reason, you need to come up with the definition of being rich as it pertains to you and your family’s lifestyle.
Another way you might define wealth or being rich is based on your net worth. One could argue that the higher the net worth you have, the more easily you can continue to grow your money and create more income. By doing this, you can support your rich life by generating passive income that pays for everything you enjoy in life, such as your hobbies, your living arrangements, and the extraordinary things you do for fun, like traveling.
So, now that we’ve discussed what it means to be rich, let’s look at how you can get there.
Get Into a Rich Mindset
The first thing you need to do to get rich from nothing is get into a rich person mindset. A rich mindset is an attitude about money, and it’s what separates the wealthy from everyone else.
When you have a rich mindset, you focus on finding as many ways to make money as you can. You make realistic financial goals and spend a lot of your time working towards them. You focus on investing your money instead of spending it. You make big future plans for yourself and your loved ones instead of focusing on day-to-day minutia.
To get into a rich person’s mindset, you’ll want to learn everything you can about money, such as investing it, making more of it, and what to do with it once you have it. The more time you spend learning about money and the different ways you can get rich from nothing, the easier these things will become for you in your everyday life.
When you build your wealth, more doors become open to you. Aside from all the fun things that you can do with money, you can also do more practical things like take better care of your health, get your children a better education, and donate to your favorite causes.
Head over to Clean Cut Finance’s resources page to find our top picks for books about money so that you can get into the right mindset and begin growing your wealth.
Create SMART Financial Goals
In order to set direction for yourself, you’ll want to create SMART financial goals. SMART stands for:
For example, say you want to make enough passive income to live off of so that you can quit your job. A SMART financial goal around that premise might be, “I want to make $5,000 or more per month in passive income within 20 years, by leveraging a business I create and money I invest, as that will cover my monthly expenses indefinitely.”
You can also create smaller, shorter-term SMART financial goals such as, “I will increase my earnings by $2,000 per month in the next 12 months so that I can start aggressively tacking my debt.”
Whatever your plan is, having SMART financial goals will help you get there, as you can create incremental goals towards how you plan to obtain wealth starting from zero.
Create a Budget and Track Your Spending
To start off getting rich from nothing, you’ll need to know where your money is coming from and where it’s going. The best way to figure this out is to create a budget and track your spending.
There are a few ways you can do this, and it comes down to personal preference. You can:
- Use pencil and paper to create a budget and track spending monthly.
- Create a budget with a spreadsheet. Download Clean Cut Finance’s free home budget spreadsheet here.
- Use the app YNAB to create a home budget and track spending easily.
- Get envelopes, one for each type of expense you have, and place cash in each envelope at the beginning of the month and not spend more than you have in each envelope on its assigned expense. This is good if you have trouble overspending on credit cards.
- Use the free app Personal Capital to import your bank and credit card transactions so that you can get an exact picture of everything in real-time. This is the preferred method if you use you don’t use cash often.
By tracking your monthly spending, you can identify spending leaks such as monthly subscriptions you don’t need, eating out too much every month, and overspending on entertainment.
You can then take steps to reduce or eliminate these expenses to create extra money to pay down debt or invest.
Live Frugally and Below Your Means
In order to get rich from nothing, you’ll want to live below your means so that you’re continually growing your wealth instead of dipping into it. By spending less than you make and living on less money, you’ll have money left over each month that can be applied towards your savings or into your investments.
Working on your money habits and cutting back on impulse spending is one significant way to better your financial well-being. When you think to buy something, ask yourself, “Do I need this, or do I simply want it?” Sleep on your impulses and see if you still want it the next day or even a week down the road.
Live frugally. That is, you don’t have to deprive yourself of nice things, but instead, keep your living expenses low so that you can focus more on raising your net worth until your investments are paying some, most, or all of your bills. Here is an article about the benefits of living frugally.
While living below your means and adopting a frugal lifestyle won’t make you rich on your own, they are good habits to get into so that you can build wealth faster. Plus, by having more money left over each month, you’ll reduce stress related to your finances and be better prepared when something unexpected comes up.
Track Your Net Worth and Increase It
Track your net worth so that you can see your progress towards getting rich from nothing. Your net worth is calculated by adding up the total value of all your assets – the value of everything you own – and subtracting your liabilities – the sum of everything you owe.
To increase your net worth, you’ll need to invest your money so that it can grow. You can do this by opening an investment account with a brokerage, such as Charles Schwab, and investing the money in the market.
It also pays to diversify and buy assets that pay you in return. Income-producing assets include:
- Dividends from stocks
- Rent from rental properties
- Interest from loans paid to you via Peer-to-Peer lending
- Rent from your own belongings that you rent out on a site like FriendWithA
- Royalties and income from eBooks, online courses, and other products you create
- Business income
Additionally, buying assets that appreciate in which you can resell in the future is a great way to increase your net worth. These include:
- Index funds
- Real estate
- A successful business you created that you sell later
By combining assets that appreciate and assets that pay you, you’ll build enough wealth and create enough income that you’ll be rich one day, even when you start with nothing or very little.
Automate Your Finances
Missing a bill payment or being late can cause you to incur late fees. Additionally, it’s easy to forget to save money each month with everything else going on in your life.
When you automate your finances, you’ll save time and energy on keeping up with money tasks monthly. Automating your finances simply means that you set up automatic payments with your checking account for bills and money transfers into investment accounts or savings accounts.
Occasionally, you’ll need to adjust when certain payments are due to make sure they’re paid on time or to adjust how much you’re saving and investing. However, it’s beneficial to automate your finances so that you don’t miss a payment or forget to save.
Read this article to learn exactly how to automate your finances so that you never miss a payment again and lock money away on autopilot,
Start Investing As Soon As Possible
To get rich from nothing, you’ll need to invest as much money as you can, as frequently as you can, and as soon as you can. Compound interest causes your money to grow exponentially.
If you start saving and investing money now, even if it’s just a little bit, you’ll be surprised how much wealth you’ll build over the years. The sooner you start building wealth through investing, the richer you can become in the future.
For example, let’s assume you invest $10,000 today and $500 per month every month. Here’s how much money you’ll have at different times, assuming an 8% ROI.
- 5 years: $51,681
- 10 years: $113,858
- 20 years: $344,979
- 30 years: $859,301
- 40 years: $2,003,845
It’s amazing to see how much your money grows every ten years, and this demonstrates why it’s essential to start investing when you’re as young as possible so that you can continue to grow your wealth.
In fact, if you have children and you’re teaching them how to get rich from nothing, consider helping them in opening an investment account before they turn 18. By getting started as a teenager, their wealth potential grows substantially.
Invest in the Stock Market
The stock market is one of the best places to make more money. When you invest in the stock market, your money grows as stocks increase in value. You’ll get additional money monthly, quarterly, or annually through dividend payouts if you own shares that pay dividends.
Investing in the stock market may seem daunting, but investing in index funds is one way to invest and limit your risk. When you invest in index funds, you’re investing in a collection of companies, often many hundreds. This way, your risk of one company going bankrupt and causing you to lose money is significantly mitigated by owning shares in every other company in the collection.
Another strategy is to invest in companies or collections of companies that pay dividends. When a dividend is paid out, you can either collect it as a form of passive income or reinvest it to buy more stock from the company. When you reinvest your dividends and buy more shares, your next dividend payment will be even higher since you own more of the company.
By repeatedly getting more shares this way, your dividend payouts will increase year over year. Then, once you need the money, you turn off the reinvesting and start collecting passive income via the dividends.
While the stock market does come with risk and the chance to lose money, it is one of the best ways to grow your wealth when you diversify your investments.
Get started with investing in the stock market with M1 Finance.
Invest in Real Estate
While the stock market rewards you every time a company pays a dividend and the value of shares increase, real estate can appreciate and become more valuable over time while you collect monthly rent payments at the same time.
You don’t need a lot of money to invest in real estate, thanks to Fundrise. With Fundrise, you can invest in real estate with as little as $10.
Fundrise allows you to buy partial shares of many properties, and you’ll earn money both when the properties appreciate and as the properties collect rent. With so little money required to get started in real estate investing, there’s no reason not to start if you’ve always wanted to own rental properties but don’t have the money to buy a property or the time or desire to be a landlord.
Similar to stock market investing, investing in real estate has its own set of risks involved, and you’ll want to consider these risks before investing. That said, real estate investing has the potential to earn you a lot of money as well.
Get started with Fundrise today and have your first 90 days of advisory fees waived.
Invest in Peer-to-Peer Lending
Peer-to-Peer (P2P) lending is also a good way to build wealth, and one peer-to-peer platform is Prosper. With Prosper, you can invest as little as $25 in small loans that people need for things like car repairs, small business expansions, or debt consolidation.
These micro-loans are pooled with other people’s money into one larger loan. So, for example, a borrower may need $10,000 for a business expansion loan, and 400 people may all contribute $25 to the loan.
With P2P lending, you’ll get principal and interest paid back to you each month. Interest rates vary based on borrower risk, and you can earn a decent rate of return by having a diverse portfolio of lower-risk loans mixed with higher-risk loans.
The drawback to P2P lending is that if someone defaults on their loan, you lose your principal. This can be mitigated by investing small amounts of money into a large number of loans. That way, if one loan defaults, your dozens of other loans will make up for it.
Never Stop Learning
One of the most important things you can do to become rich is to stop watching TV so much and start reading and always continuing to educate yourself.
Because you’re always learning, you’re always coming up with new ways to make money. You’ll gain insight that others don’t have, and you’ll come off more refined as well.
Being rich isn’t simply about how much money you have. It’s also about how your carry yourself. By being well-educated, you’ll develop better mannerisms and have more to contribute to conversations with others.
Invest in your education by taking some time out of your day to learn new things that will help you make money. Start with YouTube to find things that interest you, and then consider online courses on Skillshare. Alternatively, reading a book a week can also be a great way to expand your horizons.
Create Multiple Sources of Income
Having a single source of income is risky because if you lose that source of income, you’ll be at the mercy of finding another income source as soon as possible while living on your emergency fund, or worse, your credit card, in the meantime.
Instead of solely relying on your job for your only source of income, consider other ways you can bring money in. These can include things like:
- Having a side hustle
- Renting your stuff out on FriendWithA
- Filling out online surveys on Swagbucks, Survey Junkie, and Inbox Dollars
- Income from your investments
- Two spouses both working
- Rental money from renting out a room in your house or from properties you own
By creating several sources of income, you’ll be cushioned if one source suddenly goes away.
Create Passive Income
Passive income is income you earn 24/7 with little to no effort once the income source is set up. That said, passive income streams take money and time to get going and oftentimes can take considerable effort before each source begins to really pay off.
For example, if you created a passive income stream using dividend stocks, you would need considerable capital invested for your dividends to pay an ample amount of money.
Likewise, if you started a business that could pay you passively, such as creating a blog, it could take a few years of hard work before you start seeing worthwhile returns.
With that in mind, passive income is a fantastic way to build wealth because putting in hard work will create income indefinitely at times.
This article covers 30+ different passive income ideas. When you begin to earn money in your sleep, you’ll want to continue to find ways to do so, as this will eventually free you from having to work and lead you to financial independence.
How to Get Started When You Have Nothing
So far, we’ve discussed several different ways to get rich from nothing, but what do you do when you have no money to do those things? In the next several sections, we’ll discuss how to build up your income efficiently so that you have a foundation to work with.
Start a Business
When you work a 9-5, your income is limited to your salary or hourly wage. However, when you start your own business, your income becomes scalable, and you’re no longer capped out by how many hours you work.
Starting a business comes down to identifying what you want to do to make money and then doing any necessary legal procedures it takes to open a business where you live.
Doing market research before you open a business makes sense, as you’ll want to make sure you can profit from the product or service you intend to offer.
Business Ideas to Help You Build Wealth
A successful business can help you get rich, and there are many business ideas that require a minimal investment to get started. These include:
- Starting a blog
- Creating a Print-on-Demand store
- Being a full-time tutor of a specialized topic like math
- Becoming an SEO consultant
- Doing graphic design
- Opening a painting business
These are just a select few ideas that can get your income levels way up with just a small investment. There are thousands of business ideas out there and plenty of ways to make each one profitable. The trick is for you to take something you’re good at and make money doing it.
How to Fund a Business
Of course, some businesses require more startup funds than others, plus you’ll need money to carry you over until your business makes a profit. A business can take as long as 3-4 years to become profitable, so having other sources of income may be necessary while you get started with your own business.
Here are some ideas for getting funds to start up your business:
- Take money out of your current job’s paycheck
- Get investors to fund your business
- Ask friends and family to help
- Use a business loan
- Dip into your savings
- Sell or rent things you own
Remember, there’s no guarantee that your business idea will be profitable, so if you’re borrowing or taking money from other people, be aware of the aftereffect if you can’t pay them back.
With that in mind, many successful business owners fail multiple times before they are successful, so don’t be discouraged if your first idea doesn’t work out. Instead, learn from what went wrong to do better in your next idea. Eventually, you may strike an idea that changes your entire life.
Work Your Way Up at Work
If starting a business isn’t something you’re interested in, another method to building wealth from nothing is to climb the corporate ladder at work.
This method will require you to solve problems at your job that others can’t. You’ll want to make yourself as valuable as possible by bringing things to the table that other employees aren’t. By becoming noticed by higher-ups, you’ll have an easier time getting promoted and being offered more money.
Your job will offer you more money when you solve problems because you become more necessary to the company and they won’t want to lose you to the competition.
You’ll be able to negotiate higher pay as you’re given more responsibilities and making a more significant impact on the company’s performance. This will be one way to make more and more money which can then be invested to grow your wealth.
Change Jobs To Make More Money
Not everyone will climb the corporate ladder, so another option is to change jobs periodically.
If you’ve been at your job for 3-5 years and have not seen significant growth in your pay, it might be time to move on. It’s often possible to get up to a 20% pay increase simply by going to another company, and this is a massive difference over the average 2-3% raise you get each year staying at the same job.
So, don’t be ashamed to job hop every few years if you’re not getting paid what you feel you’re worth. Instead, apply to other companies that are willing to pay more.
Get Out Of Debt
It’s hard to get rich if you’re in debt, as when you’re in debt, you owe money to others and pay interest on the money owed. So focus on paying down high-interest debt, such as your credit cards, as soon as possible.
When it comes to figuring out your net worth, debt adds to your liabilities, lowering your net worth.
Two ways to get out of debt are to focus on whichever debt has your lowest balance or the debt with the highest interest rate. When you focus on the debts with the lowest balances first, you’ll eliminate sources of debt faster, which frees up more money. This is called the debt snowball method. When you focus on the debts with the highest interest rates first, you save the most amount of money. This is called the debt avalanche method.
Some kinds of debt are considered “good debt,” and that includes debt you incur to build more wealth. For example, if you take out a business loan to scale your business, which then earns you a lot more money than you would have had you not taken out the loan, that loan would be a “good debt.”
Don’t Keep Up With The Joneses
The concept of keeping up with the Joneses means that you spend money based on things that your neighbors and friends have. You might buy what they have because you feel like you need it too, even if you can’t afford it.
The thing is, you don’t know if your friends and neighbors can afford the things they’re buying either. This then makes you feel compelled to live beyond your means and spend too much money, leading to a cycle of debt where you never significantly grow your net worth and don’t become wealthy.
Instead of trying to be like what everyone else is trying to be, focus on bettering your own financial situation by creating good money habits. By creating good money habits, you’ll earn more money over your lifetime, have a higher net worth, and have the ability to retire younger. In addition, you’ll have more choices available to you in life, and you’ll be less stressed about money.
Do More of What Works and Less of What Doesn’t
As you go about your life of learning and accumulating wealth, you’ll likely find things that work better than others. This might seem obvious, but it’s worth saying: When you find things that work for you, keep doing those things and similar things. When you notice certain things aren’t working, stop doing those things.
Quit bad habits that are hurting your finances and your health, such as smoking, drinking, and gambling. Instead, focus on good habits that help you, such as investing, working smartly, and living within your means. These good habits will help you build more wealth throughout your lifetime, giving you the ability to retire and free yourself from work if and when you want.
Wrapping It Up
In this article, we discussed how to get rich from nothing and the various things that go into that. We went over earning more money, paying down debt, spending less than you earn, focusing on good financial habits, and doing what works.
What are some ways you build up your net worth so that you can become financially independent?