How to get rich and stay rich

How to Get Rich and Stay Rich by Fred J. Young In my ongoing quest to build a library of pre-1990 money books, I recently heeded a reader recommendation to buy and read How to Get Rich and Stay Rich by Fred J. Young. Spoiler alert: I liked it! But I almost didn’t read it.

You see, everything about this book exudes scamminess. The title is scammy. The cover looks scammy. The amateurish formatting seems scammy. But the book is not scammy. How to Get Rich and Stay Rich is a marvelous prototypical book about early retirement. I enjoyed it.

Fred J. Young, the author, was born and raised in rural Tennessee during the 1910s. His family was poor, as were all of their neighbors. Young decided he wanted to do something more than be a farmer, so he left Tennessee to become a lawyer. After military service, he worked for Harris Bank in Chicago, where he spent three decades advising wealthy clients.

During the 1960s and 1970s, Young supplemented his bank income by giving motivational talks on how to get rich and stay rich, basing his presentations on observations of his clients. In 1979, after he retired from Harris Bank, Young collected much of this material into a book called How to Get Rich and Stay Rich.

How to Get Rich and Stay Rich

“For 27 years, I worked in the Trust Investment Department of the Harris Trust and Savings Ban in Chicago, Ill.,” Young writes at the start of the book. “Most of my time during this period was spent helping rich people 1) stay rich, and 2) get richer.”

He continues:

“During those 27 years of working with rich people, I made a number of observations about getting rich, being rich, and staying rich, and about the difference wealth makes. I am delighted to share those observations with you in this book.”

Here are Fred J. Young’s eighteen pieces of advice about how to get rich and stay rich:

Anyone can get rich if they want it badly enough

Young believes that “any reasonably healthy American of normal intelligence” can become rich — if she wants to badly enough. Then why aren’t more people rich? Young says that some people have no desire to be rich; their purpose in life isn’t money-centric. Part of the population doesn’t realize early enough that it’s possible to get rich; by the time they discover they can, it’s too late. But “the vast majority of the American people would love to be rich, but ‘not that much’.” That is, they’re not willing to make the sacrifices needed to build wealth.

All riches involve a sacrifice

“In the case of every rich person or wealthy family that I dealt with [during my 27 years as a professional money manager],” writes Young, “someone made the sacrifice of spending less than he or she earned.” There’s no sacrifice required to inherit wealth, obviously, but there had to be sacrifice in order to make the money that gets inherited. “Most people who [try to get rich] will go along for a year or two spending less than they earn and then decide that they are not really getting anywhere, that they might as well get a new car.” Getting rich generally requires years decades of spending less than you earn.

What it means to be rich varies from person to person

Wealth is relative. Young grew up poor, so having $50,000 seemed like a lot of money to him. But many of his clients (back in the 1970s) were accustomed to lifestyles that cost $100,000 per year (or more). To them, having a $50,000 net worth was nothing. You are rich if you believe you are rich. (And, conversely, you poor if you believe you are poor.)

There are only three ways to get rich

Young says that in order to get rich, you have to inherit money, marry money, or make the money yourself. For most of us, the latter option is the only option. This leads to the thesis of How to Get Rich and Stay Rich. Young’s core message is this: “Spend less than you earn and invest the difference in something that you think will increase in value and make you rich.” That’s the only way that most of us will ever build a wealth snowball. (We’ll look at what Young means by “invest the difference” in a moment.)

You can never get rich from your salary alone

“Of all the rich people I know,” writes Young, “not one of them got rich from his or her salary. Salary is important insofar as it determines your standard of living,” but you need to do more with your money than put it under your mattress. (To some extent, the modern Financial Independence movement has subverted this way of thinking. We now understand that the shockingly simple math of early retirement shows that you can get rich on your salary alone, but it’s much much easier if you invest your savings.)

The rich get richer

“Them that gots, gets,” Young says, quoting his father. Or, as you’ve probably heard, “the rich get richer.” Your first $1000 is hard to accumulate. Your second $1000 is still difficult, but it’s a little easier than the first. Similarly, your first $10,000 is tough to save, but the second $10,000 is easier. Once you’ve managed to slowly build your wealth snowball, that mound of money will produce more money with little (or no) input from you. (Another way to look at it: Four percent of $1000 isn’t a lot of money, but most folks could live on four percent of $1,000,000!)

Where you live makes little or no difference

Young notes that there’s a lot of debate about cost of living and whether or not it’s easier to get rich in a city versus the country. From his experience, it doesn’t matter. He writes: “If you are the type who will spend less than you earn and invest the difference in something that will go up in value, you are just as likely to do it in one place as another.” He saw rich and poor people in every big city and every small town that he ever visited.

Certain types of people tend not to get rich

Young notes that people whose lives change frequently aren’t able to build wealth. This is an observation I’d never considered before, but it makes sense. He gives several examples. People who change jobs frequently, for instance, tend not to get rich. People who frequently move from one location to another tend not to get rich. (He says this can be a real handicap for military personnel.) And so on. Frequent life changes are a barrier to wealth.

Attitudes toward being rich change with time

During the 1920s, when Young was a boy, young people all wanted to get rich. But when he graduated from college during the Great Depression, getting rich seemed like a pipe dream. Mere survival was the primary goal for most people. Each era and age has a different attitude toward getting rich, and a different belief about whether it’s possible. Young argues that it’s always possible to get rich if you want it badly enough.

You don’t have to be educated to get rich

During his nearly thirty years in the banking industry, Young discovered that education wasn’t a predictor of wealth. “It may actually be harder for the well-educated to save than the not-so-well educated,” he writes, “because the well-educated tend to have more expensive tastes.” Plus, the educated sometimes fall into the trap of overconfidence, believing they know more than everyone else. Maybe educated people do know more, but that doesn’t guarantee wealth. An entrepreneur without a college degree can always hire smart people to work for her!

Anyone serious about getting rich should keep records

Young is not a fan of budgeting. He doesn’t advocate that readers try to plan their spending. He’s adamant, however, that in order to get rich, you have to track what happens to your money. “If you are serious about getting rich, you will find it interesting and fun.” After you’ve begun tracking your spending, he suggests breaking your costs down to a meaningful number. (For his family, Young tracked how much it cost them to live each day, hour, and minute. He frequently recited these figures during lectures.) Young also insists that you should calculate your net worth annually. He recommends doing so on February 1st of each year.

Being rich doesn’t solve all of your problems

From Young’s experience, the rich and the poor all have problems. Often, they have the same problems. (Health, for instance.) Wealth doesn’t make your problems go away. However, money can make the problems more manageable. “If you are going to have problems anyway, it is much better that you be rich. If you are rich, everyone wants to help you. If you are poor and overburdened with problems, you’re likely to find yourself all alone.”

Adversity creates opportunity

During his decades managing money for the rich, Young observed that hard times affected people differently. He says he could never figure out why some people recovered from adversity and others didn’t, but it was true. He believes that you need a certain amount of trouble and failure to keep you humble. Yet, some folks crumble in the face of adversity while others recognize times of chaos as opportunities. These are the ones who buy when the stock market collapses, for instance, while others allow a crash to bring them to financial ruin.

Your lifestyle wouldn’t change much if you were rich

Sure, there are absolutely folks who, when presented with a windfall, squander their money foolishly. But Young says that the vast majority of people who get rich by spending less than they earn and investing the difference do not change how they handle money. They got rich through a modest lifestyle, so they continue with a modest lifestyle. They do the same things they always have — they just have more money in the bank to do them with.

Staying rich is far more important than getting rich

“Once you have had a lot of money and lost it, you have big problems,” says Young. “The inconvenience of going from rich to poor is more than most people can tolerate.” To that end, it’s smart for rich people to take steps to mitigate possible disasters. That means avoiding debt, of course, but it also means maintaining proper diversification of investments. Young recommends that, once you’re wealthy, you should keep 30% of your money in “storm-cellar” investments such as high-grade bonds.

Happiness begins with good personal financial management

Different things make different people happy, but worrying about money always leads to unhappiness. “Each day you spend worrying paying your bills is going to be a lost day,” he writes. “People who do not manage their financial affairs well are invariably unhappy, or else they are totally irresponsible.” Smart money management is a base upon which you can build a happy life.

There is a time for spending

There is a time for spending — and that time is later in life. Your younger years are for earning money, for accumulating your wealth snowball. Young laments that the twenty-somethings he talks to believe they’ll never need money worse than they do at the moment. “I have bad news for these young people,” he writes. “There will be a time when they need money far worse than now, and that time will be when their health is failing, their children are entering college, or age simply starts slipping up on them.” Work hard to earn and save when you’re younger so that you can spend in later years without worry.

To some extent, Young’s advice resembles other lists of wealthy habits that I’ve mentioned in the past. The difference, I think, is that he’s not trying to be prescriptive like some financial gurus. He’s not saying, “You must do these things to get rich.” Instead, he’s trying to share what he’s personally observed during decades of working with the wealthy. His list is descriptive rather than prescriptive.

How Rich People Get Rich

The bulk of How to Get Rich and Stay Rich consists of short (one- to four-page) chapters with lots of entertaining anecdotes. There’s one exception. Nearly half of the book — 72 pages! — is devoted to the three ways to get rich. And of those 72 pages, 70 of them are about how to invest in order to build your wealth.

Young says that most of the rich people he knows got rich from one of four vehicles: real estate investing, business ownership, the stock market, or savings accounts.

He says that sure, some folks have put a lot of money into collectibles, such as baseball cards or comic books. But he’s never seen anyone get rich that way. (And I’d note that the whole “getting rich from a savings account” thing was probably a historical accident based on when Young was working and writing. Nobody has been getting rich from savings accounts during the last decade!)

“Of all the rich people I know,” Young writes, “more of them got rich from the ownership of real estate than any other means.” These folks tend to build wealth in one of three ways:

  • Some get rich by “compounding” their real estate empires. They buy an investment property. With the income from that first property, they buy a second property. Then they buy a third. “By the time this person gets to be 50 or more years old, he or she may own half of the town.”
  • Others get rich with real estate through sheer luck. They by a farm, say, then a freeway gets built nearby and suddenly the land is worth a lot of money. Or maybe oil is discovered on a formerly worthless piece of property.
  • The third group of real-estate investors got rich by buying real estate and then doing something to make it more valuable. They get the zoning laws changed to be more favorable, for instance, or they build a shopping center. Young tells the story of one client who bought a bunch of land near an airport because he believed it would be worth more in the future. Sure enough, when the jet age dawned and the airport needed to build longer runways, this guy made out like a bandit

Young spends a lot of time discussing how people get rich in the stock market. While his advice about investment psychology is still relevant, a lot of his specific information about the stock market is outdated by our standards. He’s very much from the era of picking individual common stocks. He mentions mutual funds in passing, but never dwells on their advantages. And he never mentions index funds, which were a relatively new invention when Young was writing and lecturing. (Here’s more up-to-date advice on how to invest.)

The Bottom Line

I’ll be honest. I was not expecting to like How to Get Rich and Stay Rich nearly as much as I did.

When I ordered the book, I thought it looked scammy. When I opened the package in the mail, I thought it looked scammy. When I sat down to read the book, I thought it looked scammy. Even now, after having read it, I’ll admit that I still think it looks scammy.

But this book is not scammy.

This book is built around a single principle: Spend less than you earn and invest the difference in something that you think will increase in value and make you rich. That’s about as far from scammy as you can get!

I should point out, however, that while there’s plenty of good advice in these pages and lots of amusing anecdotes, there’s very little polish. This isn’t a slick book from a slick operator. It reads more like homespun advice from your favorite uncle. Depending on what you want from a book, this could be a pro or a con. To me, it’s a pro. (Young reminds me of my friend Jim Collins.)

Take a look at the following eleven-minute video, in which the author describes meeting a young Warren Buffett at an investment conference in 1958:

This video is fun in its own right, but I like that it captures Young’s delivery and style perfectly. If you enjoy this (as I do), then you’ll probably enjoy How to Get Rich and Stay Rich.

I feel like How to Get Rich and Stay Rich is the sort of book I might give a niece or a nephew. It’s a good book for a young person just starting out in life — provided that young person has a serious mind. (No book is ever going to help a kid who isn’t ready to heed the advice, right?)

It’s also a great choice for anyone who has decided to get serious about money but doesn’t know which modern financial gurus to trust. The advice here is timeless (although some of the investing info is out of date).

And if you’re a money nerd like me? Well then, you’ll want to read this book simply because it’s fun. The author is a product of the first half of the twentieth century, and his writing shows that. That’s part of the charm.

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There are 15 comments to "How to get rich and stay rich".

  1. Freedom 40 Plan says 27 August 2018 at 12:38

    Great review. Sounds like this is definitely a worth while read. Thanks for highlighting some of the key take aways here!

  2. Cindi says 27 August 2018 at 13:01

    I bought my Hamptons home in Long Island, NY for $135,000 in 1985. I put down $75,000 and got a 25 year mortgage for the balance. When I told my real estate broker that I thought the home would one day be worth $500,00 she laughed at me. The house was a common, 1950’s style, split level. Today, this type of home is in huge demand. In 2006 the home was worth $1.25 million. Last I looked recently, after The Great Recession, the home is worth $900,000. Still, not a bad investment.
    I sold it in 2002 and made enough in equity that I retired and am still retired thanks to that equity.
    I bought another home, on acreage, for cash.
    Bought two paid-for cars.
    Paid off all debt.
    Invested the rest in laddered savings.
    I said it before and I will say it again (and I’ve never read this book) real estate IS thee way to financial riches. But, you better know what you are doing. I held onto my home for 16 years, never borrowed out that precious equity and hubby and I did all the renovations ourselves. We never hired anyone to do anything. And yes, we lived below our means. And yes, we had some rough patches along the way. For us, it was the only way to learn proper money management.

    • dh says 27 August 2018 at 20:26

      Yes, a broad US index fund and real estate (rental property or airbnb) are the two ways that any old loser can get rich slowly here in America. The other way worth mentioning is to start a business that has absolutely NOTHING to do with art, writing, blogging, film, music, YouTube, etc. For further reading:

      • dh says 27 August 2018 at 20:34

        I by “etc” I meant podcasting. 😉

        • dh says 27 August 2018 at 20:35

          And by “etc”*

          Sorry, drinking.

      • Cindi says 28 August 2018 at 12:10

        Yes, starting a business and paying income taxes, sales taxes, social security and medicare taxes on any income is the way to go. And if you hire employees you have to pay disability, state and federal withholding taxes, as well as provide health insurance if you want to be a good employer. Then there is that liability insurance should any of your clients sue you. Which eventually, one of them will. If you can stay in business that long. 3 out of 5 new businesses go bankrupt within the first three years.

        If you want to get rich picking up other people’s trash, more power to you.

        Me? I’d rather buy a smallish house in the richest neighborhood and sip mai tai’s on an East Hampton Beach (named #1 in America) while pleasantly waiting for my home equity to give me financial freedom. The first $500,000 (per couple) of equity is totally tax free.

        Nothing like being an old loser getting rich, eh?

        Keep drinking DH. And try to lay off those bitters you keeping adding to your cocktails.

        • dh says 28 August 2018 at 17:42

          Haha!! Thank you for writing and sharing, Cindi. Your comments are always fun/interesting to read for sure.

  3. Jan says 28 August 2018 at 05:51

    My dad and one sib gained their wealth by real estate- mostly family homes and a few pieces of good commercial land. Another sib gained her wealth with a small business. Neither she nor her husband had a degree much of their time in business. One neighbor worked their way up from stock clerk to high management at Sears. My friend got a two year degree in a new field- computers- in 1987. He is doing very well at the top of his industry.
    All those ways take “market timing” and knowing how to make more then you spend. Businesses start and stop. Types of degrees are good and then not so good. Real estate and stocks go up and down. Buy low, sell high and sprinkle a bit of luck in choosing wisely. Grandma used to say that having money takes money….
    At fifty “keeping wealth” seemed the most difficult part of the issue for those I knew. Some lost their wealth by taking it for granted, others gained more.
    I am in the “I feel wealthy” pocket and plan to stay here.

  4. Catherine says 29 August 2018 at 08:04

    Have you read The Hungry Spirit by Charles Handy?
    I’ve just started it and I am having some trouble with the language style but the content seems quite interesting.

  5. Angelica says 30 August 2018 at 09:20

    JD – I have been following you for a looong time, and so glad to see you back. I think, however, posts/books like this (which I haven’t read, but will try to find at the library) biases and barriers faced by POC. I’m actually a little hesitant to write this comment because I know in theory everyone is equal, but let’s face it, women still get paid less than men, women of color get paid even less, etc.

    I consider myself lucky to have fallen into a random wormhole of financials blogs (including this one!) in my 20s because no one was educating me about this stuff, but I feel like books/posts/etc with the theme of Anyone Can Do It! really fails to take into account serious challenges some folks face. It’s still great advice though!

    • J.D. says 30 August 2018 at 10:17

      I understand, Angelica. The problem, however, is that it’s clumsy to acknowledge these barriers in every article that I write. It’s awkward to include a caveat in every post, so I don’t do it. Besides, GRS is not a political blog and I try to shy away from political discussions except in very rare circumstances (most notably health care). Finally, regardless of the barriers anyone faces, it’s ultimately up to the individual to deal with those barriers in a constructive way.

      That said, I did write an article about systemic poverty and other barriers to address these sorts of concerns.

      • Angelica says 30 August 2018 at 11:44

        Totally get it! Although interesting you characterized it as a political issue. I think we can both agree that that is one cheesetastic book cover.

        • J.D. says 30 August 2018 at 11:51

          It’s a political issue in that not everyone agrees about the sources and solutions of the barriers. I suspect that you and I are in agreement, but not everyone is. The systemic poverty article I linked to took me a LONG time to write because I was trying to be fair and balanced (haha). I think I did a good job, but my ex-wife — who is the one who prompted me to write the piece — disagrees. She thinks my position isn’t strong enough.

          I guess part of the issue is that although I recognize that these barriers exist and ought to be torn down, I fundamentally believe that it is up to each individual to improve her life. Sure, we should work to correct societal ills — although there’s disagreement on what constitutes societal ills — but I think our primary focus should be on what we can do ourselves to improve our own lives at this moment.

  6. Mark Ferguson says 04 September 2018 at 16:17

    Real estate has been amazing for me. I have close to a 5 million dollar net worth now after starting with $20,000 or so 10 years ago. I was able to earn a great income and invest well with real estate.

  7. Ileana Bravo says 11 September 2018 at 09:53

    Great article! The best way to increase your money is to invest the difference between your expenses and income. Saving them in a bank account won’t help. I have been started investing since I was 20. I used to buy small amount of shares. Eventually, I started investing in bigger things like real estate and my online business. No doubt, there is always a risk involved but the reward is pretty much high. So keep on investing. Start with small and then aim for higher.

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