How you invest to get rich

Learn the difference between 2 poor habits and 2 rich habits in 5 minutes

‘Nico, I am not interested, investing is only for the rich’. I heard it again last weekend while drinking some great Belgian beers with my friends.

I have no idea why this simple sentence fires me up every … single … time !

I ignites an internal storm of emotions so hard, that I can hardly formulate my reply in my head. Every fibre in my body screams in outrage and I have a very tough time controlling my words when I do try to reply.

Times have changed

The thought of having to be rich in order to invest is a very ‘old’ statement that did have a lot of truth many years ago. Investing was hard at those times: there were no low cost brokers that were available to everyone. In those times, investors needed to go to the bank to place their ‘orders’. This meant that often you needed to invest higher amounts of money in one go.

Luckily a lot has changed in a very short period of time. Even in Europe, we have low-cost broker platforms available now that offer excellent transaction costs. We are not at the level of the USA yet, where you have 0 transaction cost trading, but I dare to say that we are quickly evolving that way.

Unfortunately, especially in Europe, this notion of having to be rich before can can start investing, is still extremely alive.

Poor habit nr1: keeping all your money in a bank

If you are not investing at this point, no matter how young you are, please keep reading. This simple notion can completely change you life. If you have any amount of money in the bank, inflation is eating away your profits every single day!

First of all: why do we need inflation anyway? Very simplistically put: we need some degree of inflation to make people spend money. Spending more money is good for the company. Growing companies mean a growing economy. A growing economy means a growing country. It is as easy as that.

In Belgium, the yearly inflation rate was 4.11% ! The best yearly interest rate in a Belgium saving’s account is around 2%. That means that while you THINK you are saving money via the bank each year, you are in reality actually LOSING money, namely 2% a year. That is HUGE !

You would think that all Belgians know this, but considering in Belgium we have 268 BILLION euro’s in total in our saving accounts (anno 2023), I have to (shamefully) admit that we do NOT understand a thing about making money.

Poor habit nr2: keeping bad debt

In Europe student loans are very uncommon. I can go to a ranked top 100 university in Leuven and spend less then 10k on tuition money for a Master university degree over the course of 4 years. While I know that in the US, many people have to pay into the one hundred thousands sometimes. If you have bad debt, please pay that first.

What is BAD debt ? By bad debt, I mean debt that has a very high yearly interest rate. In Europe, I would say anything above 5%. Personal loans and (luxury) car loans fall into this category. The yearly interest that you have to pay, will almost be the same as your investing yields (profits).

Not all debt is bad though: for example, almost everyone needs to take a mortgage on our house. So, I do not consider house debt ‘bad’ debt as everyone needs a house (or an apartement). However, if you are paying above 7% a year, I would advise to move to a smaller house, but again that is a very personal consideration.

This is a hard one and I suggest getting 25 side hustles and 4 extra jobs to get rid off it. Of course I am kidding, but the idea is this: raise extra money however you can. If this means giving your neighbour’s parrot a pedicure for 5 euro’s, then do it !

Rich habit nr1: Use your saving account as an emergency fund ONLY

A saving account in a bank should be used for your emergency fund ONLY. Most books suggest about 6 months of living expenses. My thought is that it all depends on the ‘certainty’ of your current job. IF you have a secure job, maybe you could get away with less, if you are not sure about your job, you will probably need a lot more. In the end, this is a very personal thing.

Rich habit nr2: Start Investing in a low cost worldwide index fund

Once you have a little bit of money set aside in your emergency fund and you paid off any bad debt (the parrot thanks you), it is time to stop losing money yearly and finally MAKING some.

As mentioned above, most people think investing is extremely complicated, risky and requires hours of study. This is the true power of marketing: it is nothing more than the marketing campaigns of the banks that make you think this. Banks do NOT want you to start investing, their want that you keep your money in the bank, while they make monster profits every year.

I have a degree in investing, I have read about 50 investing books, spend hundreds of hours listening to finance video’s on YT, podcasts, finance audio books. I have done all the research for you: all you need (as a basis!) is a low cost worldwide index fund (ETF). For example (personal opinion, not financial advice), VOO or VTI in the US, IWDA/SPPW or VWCE for Europe. Europeans usually are better of with accumulating funds (ETF’s) that reinvest the dividends back into the fund, while Americans always have distributing ETF’s that pay you a dividend quarterly (for worldwide index funds).

Next thing is to chose a low cost broker: it is easy to find on the internet. In Belgium, banks offer their personal ‘house’ broker platforms. They can be up to 10 times as expensive as some independent low cost (foreign) brokers. I would always advise against investing out of a bank in Europe. In the US, from what I have seen myself, most broker platforms are low cost already.

Start low, end high

Last thing is to put whatever money you can spare, into that ETF. Even if it is only 10 euro or dollar a month. Often good brokers have what is called ‘fractional’ shares, which means that you do not buy 1 entire share, but for example 0.5 share.

You can start investing from as little as 10 euro or dollar !

There is only ONE investing secret left : TIME ! The more time you have while being invested in a worldwide index fund, the more you will earn. On average, the stock market has returned around 8% a year. Let’s say 7% after all transaction costs, that is way higher than the 2023 Belgian inflation of 4%.

Just invest like you put whatever money you have left, just like a bank. Do not think about it, just do it. If you can let it sit for longer than 10 years, you WILL earn a lot of money.

Will you start investing now you know this information? Let me know in the comments below