How do we become wealthy? Our clients often ask this of us, naturally, as their financial advisors. Sometimes they’re surprised to hear us not say, “Save more,” “Don’t accrue too much debt,” or “Put your investments here or there,” as a first course of action. Of course, long-term savings of at least 10–15% of your income starting at a young age, combined with a decent investment plan left untouched for long periods of time, will inevitably produce substantial amounts of wealth. However, if you really want to get ahead, invest in yourself—and keep investing in yourself!

After over 23 years of being a financial advisor, including a five-year stint as a corporate human resources director, I can confidently say that the best way to really build wealth, after saving and investing diligently, is this:

Think. Think very hard about what you want to do with your time in a professional capacity. This process should involve a personality survey (such as a DiSC analysis) and a career guidance counselor for most of us. The phenomenon on people who know exactly what they want and end up doing “that thing” with their lives is exceedingly rare. Spend the time and effort to set your direction.
Continually sharpen your saw. Develop your skills that will get you paid more or at an increasing rate as compared with your peers. Also remember that “skills” are not always just “technical” skills!

I say “as compared with your peers” carefully. Even if you are a lower-paid employee, such as some types of administrative assistants, for example, developing your skill set around your expertise will almost always earn you a return that you simply can’t get from the stock market!

Take the example of Jane and John Doe:

Example 1: Jane Doe invests $10,000 annually in her 401(k) for 10 years, earning 8% per year, and develops her skill set to improve her current earnings of $50,000. Because she’s good at her job and keeps getting better, she receives raises of 4% per year. After 10 years, she is being paid $74,000 per year and is then able to afford $20,000 in annual saving per year for the next 20 years of her career. Her cumulative 401(k) balance is about $915,000 after a 30-year career. Nice work, Jane!

Example 2: Just like Jane, John Doe invests $10,000 for 10 years, earns 8%, and hides under his desk, so his raises are only 2.5% annually. After 10 years, John’s being paid only $64,000 (compared with $74,000 for Jane). He also can’t afford additional savings because he’s not getting paid as much, so he continues with his $10,000-per-year savings rate for the remainder of his career. His cumulative balance is only about $697,000 after a 30-year career. Nice work, but not as nice as Jane. She has $218,000 more than John simply by virtue of saving and earning a little more.

This $218,000 may mean the difference between amazing vacations versus camping trips with the grandkids on the affordability scale.

How Do I Do This?

Sharpening the saw basically means doing basic things like going to professional conferences, reading job-related publications, and joining and attending professional affiliations. These activities should be a part of every professional’s normal job duties, and many employers are happy to pay for them.

Another reason to sharpen your saw is for long-term job retention, including forestalling the possibility of being outsourced. According the University of Oxford paper The Future of Employment, jobs in the future will definitely not be the same! The paper is an interesting read, especially if you can sum it up for your children! You can check it out here: http://www.oxfordmartin.ox.ac.uk/downloads/academic/future-of-employment.pdf.

Although the paper presents a simplified version of what improved skill sets can get you, it demonstrates how powerfully our decisions today can cast a shadow on future wealth. Increasingly, we see jobs being made obsolete or phased out. This phenomenon is happening at an increasing rate.

My point is simple: If you really want to become wealthy, don’t look for the home run in some short-term “get rich quick” investment scheme. You stand a 99% chance of failing. Instead, take the time to really think about what you might like to do and then always be sharpening that saw. It’s almost a certainty that you’ll end up wealthy!