The internet is filled with tutorials on how to get rich. This type of content receives a considerable amount of traffic, so therefore it is appealing to content creators seeking to grow an audience.

Lack of opportunities and well paying jobs, the concentration of assets by a few, and financial illiteracy are some reasons why this topic is so popular. Everyone wants money to live a more comfortable life, and purchase what their hearts desire.

Some Context

The other day I was browsing the Internet looking for financial blogs for inspiration and ideas for content. In my search I stumbled across Mr. Money Mustache, one of the top rated blogs in finance, according to fool.com.

Intrigued by the page’s success I browsed a few post until I reached the most viewed. The post title is “Getting Rich: From Zero to Rich in One Blog Post.” I was inclined to share my opinions and complement to the post.

Summary

Lets begin with a recount of the blog post. Mr. Money Mustache’s post main point is to help the average middle class person improve its financial situation. This is achieve by doing one thing: saving and investing money. In his words, this is the only way to become rich.

The author makes a distinction in the way most people perceive the act of saving. He emphasizes that saving shouldn’t be viewed as a sacrifice. One can increase saving by avoiding buying unnecessary or “wasteful” stuff.

This is the biggest mistake most people make and stopping this should be a priority. By cutting these expenses, the reader can save a lot of money without modifying its lifestyle. After all these purchases don’t improve the life quality.

The author encourages the reader to focus on happiness and the simple things in life. This is contrary to luxurious and convenient lifestyles that the systems encourage us to pursue. A change in lifestyle can result in less expenses and more saving.

Finally, the reader is advice to invest his savings into exchange trade funds and other investment options. This is encourage because it provide a return over the saved capital, and increase wealth over time.

From Zero to Rich: My Review

The author focus in two fields of financial planning: budgeting and investment.

Budget activities are in charge of controlling and categorizing expenses, and analyzing the bottom line at the end. It is crucial to have expenses under control, and can help maximize the remaining income.

Investing is concerned with producing a return of assets. The priority is to maximize the return while minimizing the risk. Even though the post doesn’t have a deep down explanation of investment, it suffice with explaining return and wealth growth. For a more in depth explanation I recommend you to check out this video and for professionals this textbook.

The author advise may work for general audience. In order to become financially rich one has to buy as many assets as possible. These assets will eventually provide return enough to live with, and working will no longer be a necessity.

The only way to do this, given one isn’t counting with a family inheritance, is to put a side portion of earnings and buy assets. The questions about which assets to buy is another story…

Limitations

On the other side, it runs short for people that have complicated capital structure structures or don’t make enough to save. For example, people who have student, car or other type of loan should prioritize reducing their cost of capital instead of purchasing assets.

Only when the capital structure is optimized (tax shield and cost of equity), then we talk about saving and building wealth.

Decision Making

Decisions that require the least effort/resources and provide the biggest results are the most import to make. Unfortunately, everything related to money takes time.

There is no scheme to get rich over night that doesn’t come with and absurd amount of risk. Having this in mind, it is always important to set clear expectations when giving a financial advise. This is why I recommend to be skeptical of anyone selling the idea of going from Zero to Rich, specially over night.

Finally, changing purchasing habits can become challenging. People who shop compulsively need to go through some serious counseling to stop their consumption habits. On a glance, change looks easy but it can demand a big effort.

Conclusion

Mr. Money Mustache’s advice can be useful and motivational to the average reader. “From Zero to Rich” post provides a first step towards improving finance and growing wealth. A simple budgeting exercise can be a quick win for someone that has fallen into the habit of buying things they don’t need.

Given no debt, the excess cash should be used to buy assets like index funds or ETF (not financial advice).

Finally, every change must be paired with a deep reflection in our priorities and values. By aligning our values with our decisions, like when we stop pursuing a luxurious and convenient life, it becomes easier to cut expenses and build healthy habits.

I’m glad you made to the end. Let me know what do you think of my review.