Top financial adviser: Just working hard will not make you wealthy
Ric Edelman is the founder and executive chairman of Edelman Financial Services, one of the nation's leading financial advising firms, and author of the new book "The Truth About Your Future: The Money Guide You Need Now, Later, and Much Later." In this video, he explains why there's such a strong emphasis on working hard but it's just one component to building wealth. Following is a transcript of the video.
If all you do in life is work really hard you're never going to get wealthy.
A lot of people have a misconception about creating wealth and this is foisted on us by the American education system and it creates a fallacy and here's what it is: the American education system is designed for one purpose. To give you knowledge and so that you can take that knowledge and apply it to a career so that you can get a job and earn money.
In other words, we teach people to work hard. And we’re really good at rewarding that, by giving you a salary. Well that's all well good, and I don't dispute, I don’t disagree with any of that, but it's only half the story.
What you must equally do is work smart, not merely hard. And here's why I say that. If you take some of your hard-earned money and set it aside as savings and you only put it in a bank account where you’re earning, well you tell me, what are you earning in bank accounts these days? 0.1%? Or you put it in a bank CD at 1% or 2%. If you leave it alone and let it grow for decades, at 1 or 2%, it's never going to grow very much in value.
You have to get the money growing at a rate of return where compound growth works and that means you need to earn 6%, 7%, 8%, 9%. You’ve got to get into the high single digits. Forget about 10, 20, 30, 40%. Those are scams. Nobody’s capable of making 10, 20, 30% a year over many years. Forget about that.
All you need to do is build diversified mix of investments using low cost, exchange-traded funds or mutual funds, and you can build a diversified portfolio on a global basis. It’s really easy to do. You can get the rates of return that you need over decades in order to achieve your financial goals.
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