Are “Smart” Money Moves Preventing Us From Becoming Rich?

Are the traditional "smart" money moves such as working a secure job and investing in stocks actually preventing us from becoming rich? Or is starting a business the best path to great wealth?Back in January of 2017, most personal finance professionals, advisers, bloggers, and just about anybody willing to give you money advice said to avoid investing in crypto-currencies such as Bitcoin.

The price of Bitcoin at the close of 2016 was $963.74 per $1 USD. On the last day of 2017, the price was $14,156.40.

That’s a 1,369% gain in 365 days.

Whether you subscribe to the opinion that Bitcoin is a bubble or the future of currency, crypto-currencies are an extraordinarily volatile asset class.

Bitcoin was and still is a speculative investment with enormous risk.

Nonetheless, Bitcoin was an excellent investment choice in 2017.

But it wasn’t the best crypto-currency to invest in last year. In fact, it was 24th on the list of The Best Performing Cryptos in 2017, according to an analysis of data sourced from coinmarketcap.

What was #1? A currency called Verge rose 1,171,479%.

Past performance is not indicative of future results.

This is Not About Bitcoin

I’m not qualified to offer readers any advice on investing in Bitcoin or other digital currencies. I personally did not invest in Bitcoin and do not plan to.

Because I tend to make “smart” money decisions. Not risky ones.

I invest over the long-term and avoid the flavor of the day.

Most of my investments are boring, aside from an occasional speculation or trying the latest fintech platforms.

I don’t borrow money to invest.

But people do become very rich by ignoring the “smart” advice and making risky bets. Multi-millionaires have arisen out of the crypto-currency craze and will go on to live lavish lifestyles and start new businesses.

Are they smarter than us? Lucky opportunists? Just not afraid to take a risk?

Or are they doomed to lose it all when the euphoria is gone? Some might. But nimble investors will exit with profits.

Back in the dot-com era, famous entrepreneur Mark Cuban cashed out when he and his partners sold Broadcast.com to Yahoo in 1999 for $5.7 billion dollars.

Yahoo shut down Broadcast.com in 2002 and sold most of itself to Verizon in 2017 for $4.48 billion in one of the saddest tech stories of the past century.

The crypto-currency craze may mint more billionaires in a similar fashion, but far more amateur speculators stand to lose a lot of money if (or when?) the hundreds of recently minted digital coins falter. Trying to predict which digital coin will ultimately prevail or fail is a tricky game.

Netscape was an innovative company there for a while. So was Pets.com… and Webvan… and Amazon.

The vast majority of people do not have the stomach to risk everything they have on a big idea that could make them super-rich. Perhaps it’s because being super-rich does not necessarily make you happy (so I’ve heard). But losing a lot of money will most surely make you very unhappy.

So why bother?

The Infinite Ceiling

In a recent post called What If I Don’t Go Back To Work, I wrote about the prospect of potentially focusing on my online business full-time instead of going back to a 9-to-5 job. When Business Insider picked up the story, they reworded the title to focus on one point I made.

That a day job might not be the best way to build wealth.

The traditional smart advice kids hear in high school is to get a college degree, maybe a masters. Then land a full-time job, contribute to your 401(k) for 30-40 years and Voila!, you’ve made the smart money moves required to retire by age 65.


Talk to the Mark Cubans and Steve Cases of the world and they’ll tell you to take big risks while you’re young. Start a business or make high-risk investments for big returns. If you lose it all, you’ll have time to clean up your failures with a full-time job later on.

As we age and shoulder more responsibility, taking big risks is more difficult because the consequences of failure may reverberate down to our dependents.

Not to say you can’t dabble in cryptos, buy a few speculative call options, or work for a startup. But taking a significant risk where you put it ALL on the line to strike it rich is not considered a smart money move when you have a family.

When I wrote that piece about potentially not going back to work, I was fully intent on going back to work. And I still am.

The plan is to reclassify (in my mind) my online business back to a side business and re-enter the corporate world full-time.

Earning a salary and benefits from a full-time job can be rewarding both professionally and financially. But my earning potential as a full-time employee in my field is capped at a ceiling. This is true for most full-time jobs and careers.

My online business, on the other hand, has no earnings ceiling whatsoever. It’s what makes the internet such an exciting venue for business.

By returning to a full-time job, I will not be pursuing that infinite ceiling with 100% of my energy. Instead, I’m doing what my parents and most everyone else thinks is the smart thing to do. I’m getting a job for the steady salary, benefits for my family, and peace of mind.

But I’m going to attempt to have it both ways. Return to work for the security and “smart” money and still pursue the infinite ceiling by growing my online business on the side. Though less of my brainpower will be focused on entrepreneurial pursuits, the work I’ve done since its inception has positioned it for growth.

Fortunately, the side business I’ve chosen does not require full-time attention for success.

The Smart Money Move of Today

The S&P 500 returned 21.83% for 2017, including dividends.

That sucks compared to Bitcoin and Verge. But awesome by any other measure.

By simply following Warren Buffett’s advice and buying an S&P 500 index ETF such as the SPY, you experienced excellent returns since the last recession.

A 20% gain from index investing in one year won’t make you rich. If you’re content to invest all of your tax-advantaged contributions and surplus cash flow into equity index funds and ETFs, you’ll only match the market indices and keep up with everyone else doing the same.

But just by owning stocks, you’re better off than about half of all Americans who do not.

Index investing is the “smart” money move of today. Your money will grow a lot more than the one-half of Americans not invested, but you’ll only earn about the average compared to the other half.

Combined with low annual expenses and a high savings rate, following this path is enough to become wealthy. Especially in a bull market like we’re in right now.

But it’s not enough to become super-rich, loosely defined as wealth beyond financial comfort, to the point of having more money than you know what to do with it.

To build a significant net worth, let’s say to enter the wealthiest 2%-3% of U.S. residents (net worth greater than about $5 million in today’s dollars, according to this calculator), it’s going to take more than a high savings rate and consistent index investing for most of us.

What’s Really Preventing us From Becoming Rich?

For more than a decade, I built, tweaked, and refined a few elaborate money spreadsheets on a daily basis. I was so concerned with counting each and every penny I earned and spent that I ignored the precious resource I was wasting.

My time.

Even though I still believe it’s important to start saving and investing early and to cherish every penny in your name, counting your earnings doesn’t earn you more. Tweaking your budget, clipping coupons, switching to a higher-interest savings account, or even pursuing a higher education degree will not make you rich.

As written by Jeff Haden of Inc., in the article entitled The Only Way to Get Really, Really Rich (No matter how you define rich):

…the only way to become really rich financially and really rich personally–in other words really, really rich–is to start your own business. Even if it’s just on the side. Even if it’s just a slightly stepped-up hobby.

There’s no reason not to. You don’t have to quit your job right away; in fact, you probably shouldn’t. (One of the best ways to minimize your risk is to keep your full-time job while you build your foundation for success.) Plus the basics of starting a business are easy; you can do it in one day.

It’s a worthwhile read for anyone contemplating entrepreneurship or in the midst of building their business. Your own business has the potential to make you both financially rich and rich in life, due to the sense of purpose and excitement that comes with entrepreneurship.

And the article is a reminder that the “smart” advice we were given in our youth and still receive today is more accurately described as safe advice, not a path to riches.

So you could say that working for someone else and deploying a basic equity investing strategy is preventing you from becoming rich, counter to what you normally hear.


See, I told you this wasn’t about Bitcoin. But, you know, even if you invested $1,000 in Bitcoin on December 31st of 2016, which would have taken some fortitude, that investment would “only” be worth $13,692. A nice chunk of change, but hardly life-changing.

To get rich via investing alone would take many big wins like that, and a lot of time researching investments in hopes of beating the market returns that come from indexing. Which, by the way, 80% of professionals can’t do.

Why not take some of that money and invest it in starting your own side business? Business ownership is how a big portion of the Forbes 400 Richest Americans acquired their wealth as Haden points out in his article. And it’s how many of the top 2%-3% earned their wealth too.

This is certainly not what I had in mind when I started my business. But it’s become more clear since. Though my business was never meant to make me financially rich and probably never will. I set out to make a few extra bucks a month to help support my family. Based on that, it’s been a success.

Photo by Kevin on Unsplash

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  1. Interesting perspectives, thank you for sharing them. I think there is much to learn when ones starts their own business, both personally and professionally. If it will really make you rich….I kind of doubt it unless you are on of the few that have the right insights and opportunities at the right time. But hould that stop you from exploring it, by all means no! Go for it, if its your dream then dream big.

    1. Thanks for chiming in. One aspect of that INC article that I sort of mentioned was that starting a business will make you rich in terms of feeling alive and excited to work. Personally rich. I can attest to that feeling with my business pursuits much more than my 9-to-5 career.

  2. I like this perspective a lot. Even if your business doesn’t make you financially rich, it’s likely to make you slightly more rich than you’d have been otherwise – in addition to being personally enriching.

  3. Good stuff! I’ve learned so much through my different entrepreneurial efforts. While they didn’t make me tons of money, they did make me rich in other ways.

    Success and being rich, are like beauty, in the eye of the beholder.

    1. Yes, I never really thought of it that way until that’s where this post ended up going. Just started writing this one and didn’t expect it to go to entrepreneurship. I was thinking more about risky investments.

  4. TheRetirementManifesto says:

    Words of Wisdom, RBD. I look at your entrepreneurial investment as a “diversification” play. Sprinkle money everywhere (except bitcoin, I don’t have any of that, and never will), and watch the flowers grow. Just don’t step on them when they’re starting to sprout. Leave them alone, and give them time in the sun. Water occasionally, and enjoy life.

  5. Love this, RBD! Thank you for sharing your insights and perspective. I completely agree that the way to wealth is through business ownership. I also like the advice of starting a business on the side while continuing to work a full-time job, at least in the beginning. That is a great way to have your proverbial cake and eat it too.

    1. I thought about using the cake and eat it too saying but elected not to 🙂 But that’s exactly it.

  6. Although I left the 9 to 5 corporate world behind and do run my own business now I made way more money, enough to never have to work again, from my corporate job. The odds of making that kind of money as an entrepeneur are pretty small. I think there is a lot to be said for getting FI working at a 9 to 5 that I loved and then retiring early to play at entertaining side gigs that may or may not make a lot of money.

    1. Thanks for your insight. Yeah, there’s definitely no guarantee. I never had the courage to start a business from scratch after quitting my job. Myself and many others like the side gig aspect of entrepreneurship so you’re not risking everything all at once. That said, you’re chances of big returns are far smaller.

  7. Blastmaster says:

    I could probably duplicate my full time job income if I pursued my side hustle full time. It may even take off and make me rich. However, I am fiscally conservative and have supported a stay at home wife and children on one income for 22 years. The security of my job is as strong as it gets and knowing that is iirreplaceable to me.If I quit, there would also be no company match for retirement contributions and my company pays 83% of my health insurance premiums. I am also about 10 years from full pension, which is tough to give up. Through carefull spending, I am maxing out the 401k plus 2 iras from my income and banking the side hustle income. Currently would be able to pay off house and be debt free. The combination of FTJ and Side Hustle are combining to create a stable financial situation eventually leading to FI. It may not be my dream job but I am thankful for it and the steady income, plus the potential for Overtime. I will certainly encourage my college age sons to take risks early and pursue their dreams. We all can’t strike it rich or create the next Amazon but we do live in one of the few countries on earth where you can rise above and change your situation through hard work and planning. So glad to have found the FI community and your blog

    1. Blastmaster,
      I appreciate you adding your story to this post. 22 years as a sole breadwinner + college now is no easy task. But working for a solid company can definitely be an excellent foundation from which to build your FI stash. Sounds like you have the best of a work situation and side hustle. Now that I’ve been focused on my side hustle for a few months, I realize how hard it would be to earn as much as my previous salary. And that’s in a good economy. The FTJ/side hustle combo does seem like the right path for a lot of us, and does seem to be gaining steam with others especially with all the platforms and gig opportunities. Next week I should have an update on my employment situation and I plan to share more about my future plans. Thank you for the kind words.

  8. RBD –

    A very well thought out and thought provoking article. Investing in yourself and your own pursuit could be worth a limitless amount of money and a more fulfilling life. That’s exactly what Bert and I have been doing on the side now for almost 4 year’s and gosh damn = it’s gotten better and is definitely more fulfilling. Great article and thanks for sharing.


  9. Thank you for sharing this article with us. I thoroughly enjoyed it, and agree with you that the best way to get rich is to take risks contrary to conventional wisdom.

    However, the flip side of the argument is that the Cuban’s of the world are an example of survivorship bias. We know the stories of, and celebrate those who have risked it all to become millionaire and billionaires. However, we are not being told the countless stories of those who quit their jobs, quit their college careers, worked at a startup and ultimately failed. I would imagine that sinking all your time and energy into a project that ultimately fails after a few years will be tough. After all, most businesses fail within the first five years.

    Perhaps the “more stable” path is to get a job and save for a few years, at least that’s what may work for most people.

    Fun story, at my university, the people who did the dorm cleaning were college drop-outs earning $8/hour ( that was perhaps 15 years ago).

    Personally, I am a coward, so I try to follow the multiple streams of income route – wages, side income and investment income. I will never be the next company CEO, or the next Jeff Bezos or the next Warren Buffett, because I do not exclusively focus on perfecting one skill. But I am fine with it. Call is risk avoidance.

    I do not think there is a major difference between having 1, 2, 5 or 10 million. Perhaps there is a difference between having $100+ MM and a couple of million. But I definitely know that there is a huge difference between earning $20K/year and barely making ends meet, and being comfortable. So I want to avoid that outcome, even if it means I am never on Forbes.

  10. Becoming rich definitely involves taking a risk in some way, but it’s possible to hedge that risk. Really like your example of starting a business and keeping a full time job. It’s a risk, but it doesn’t leave you overexposed. Some people might say that by not going all in then maybe you won’t succeed because you have something to fall back on. It all depends on perspective I guess.