How do you become a millionaire?
It has been the subject of hundreds of bestsellers over hundreds of years, and yet today it's still the most searched term on the internet.
Making money might be the most widely talked about yet widely misunderstood subject on the planet today, which is puzzling to me, because the formula itself is extremely simple.
Of course, simple does not equal easy.
Just like if you're overweight, losing weight is extremely simple:
- Exercise every day
- Eat less calories
Simple, but not easy.
The difference between losing weight and getting rich is, most people know the formula for losing weight, but many people are still clueless to the formula for getting rich.
So where can we start?
A good place would be Rich Dad Poor Dad, probably the most famous personal finance book ever written.
Robert Kiyosaki defines the first rule for getting rich in the first chapter:
The poor work for money. The rich have money work for them.
I think this rule is great because it requires you to redefine your idea of money.
Instead of money being something that you spend, you need to start thinking of it as a tool that you can use.
So now we know we need money to work for us.
How do we do that?
Well, we need to accumulate some money first.
Accumulating money is also a very simple formula that most people already know.
George Clason puts it succinctly in the classic The Richest Man In Babylon:
Spend less than you earn and invest the difference.
So our formula looks like this:
- Spend less than you earn so we accumulate money
- Invest that money so it works for us
- Repeat
Now here's the important part - how do we implement this in real life?
What does it actually look like on a day-to-day basis?
I have a system to implement this in my daily life that I've developed and used personally since I was a teenager.
Don't worry, I won't make you buy a $799 course to learn it.
In fact, I'll explain everything you need to know about it in the next five minutes.
The 3 Arrow System
The 3 Arrow System is a method of taking each dollar you earn and giving it a way to multiply on its own.
Remember - the poor work for money, the rich have money work for them.
At the start, you might only afford to put in $1, and it might only generate 5 cents.
But that's okay.
In fact, that's life-changing, because if you're consistent, it will grow, and that $1 will one day become $100,000, and that 5 cents will become $5,000, and now you're generating thousands of dollars on autopilot.
Let's see how the 3 Arrow System works:
Yellow Arrows
The yellow arrows are the first arrows in the system.
They represent cash flow.
Take a look:
Everyone should already have at least one yellow arrow, which is your job.
However, it is ideal to build multiple yellow arrows.
The more cash flow you can generate, the better your system will generate wealth.
What are some ways to build more yellow arrows?
For some it's as simple as getting a second job on the weekend.
Other people might prefer to drive Uber or do freelance work.
The side hustles I have been using to build yellow arrows for the @moneybren portfolio are matched betting, flipping and niche sites.
The yellow arrows are the foundation to building wealth.
You must be accumulating money if you want to have money to work for you.
More importantly, you must be putting the cash from your yellow arrows into your system!
If you spend the money from your yellow arrows on beer and clothes, you no longer own it and it's now useless.
If you want your money to work for you, you must invest your yellow arrows to generate green arrows.
Green Arrows
When you invest your yellow arrows into assets such as stocks, property, bonds or crypto, they will produce green arrows like interest, rent, capital gains and dividends.
Green arrows should require zero or little work from you personally.
For example, you use your yellow arrows to buy stocks, then every quarter those stocks pay you green arrows (dividends) on autopilot.
You use your yellow arrows to buy a property, then every week your tenants pay you green arrows (rent).
This is what Kiyosaki is talking about when he says the rich have money work for them.
The green arrows are better than yellow arrows, because the yellow arrows you have to work for (like wages, side hustles), but green arrows don't require you to work. This means you are now making money while you are sleeping.
But the real secret is what you do with these green arrows.
Many people get to the stage where they are producing green arrows and start spending a lot of money.
For example, you make a lot of money on stocks or property, then take that money and buy a car or go on vacation.
Wealth is easily destroyed this way, and soon these people might find themselves back at square one.
If you want to truly build wealth, the secret is reinvesting your green arrows into even more assets.
For example, you receive a dividend, and use it to buy even more stocks.
You double your money on a property, and then reinvest it into two more properties.
Then you will start to generate blue arrows, which is where the real magic happens.
Green Arrows
How do you generate green arrows?
They come from investing your yellow arrows into assets such as stocks, property, bonds or crypto.
These assets are powerful because they have the ability to generate cash passively.
This is when you will start to enjoy green arrows like interest, rent, capital gains and dividends:
Green arrows should require zero or little work from you personally.
For example, you use your yellow arrows to buy stocks, then every quarter those stocks pay you green arrows (dividends) on autopilot.
You use your yellow arrows to buy a property, then every week your tenants pay you green arrows (rent).
This is what Kiyosaki is talking about when he says the rich have money work for them.
The green arrows are better than yellow arrows, because the yellow arrows you have to work for (like wages, side hustles), but green arrows don't require you to work.
This means you are now making money while you are sleeping.
But the real secret is what you do with these green arrows.
Many people get to the stage where they are producing green arrows, and since they have passive income they start spending a lot of money.
For example, you make a lot of money on stocks or property, then take that money and buy a car or go on vacation.
Wealth is easily destroyed this way, and soon these people might find themselves back at square one.
If you want to truly build wealth, the secret is reinvesting your green arrows into even more assets.
For example, you receive a dividend, and use it to buy even more stocks.
You double your money on a property, and then reinvest it into two more properties.
Then you will start to generate blue arrows, which is where the real magic happens.
Blue Arrows
A blue arrow occurs when you take your passive income and reinvest it to buy even more assets to generate even more passive income.
Understand that blue arrows are the end goal.
Whenever I make any investment decision, my intention is always to try and grow my blue arrows.
What does a blue arrow look like?
Say you have an investment property and you've paid off the mortgage.
The tenant is paying you $400 a week (a green arrow).
You take that $400 every week and invest it in stocks.
Every quarter those stocks pay you a dividend (a blue arrow! Nice!)
This is a blue arrow because you didn't have to work to buy those assets.
Your green arrows did it for you.
Now every time you receive that dividend, you can use it to buy even more stocks (another blue arrow!)
You have now taken one source of passive income (rent) and used it to buy even more passive income (dividends), which you are using to reinvest for even more passive income (more dividends).
This is the reason blue arrows are so powerful.
By reinvesting your green arrows, they will grow exponentially on their own, making you more and more money while you're sleeping.
How To Get Started
Remember, it all starts with the yellow arrows.
You need a source of cash flow, and more importantly, you need to spend as little of it as possible.
If cash comes into your bank account but doesn't get invested into green arrows, it's useless to you.
If you're looking for ways to quickly grow your yellow arrows, my top recommendations for Kiwis are matched betting or flipping.
Step 1: Optimise your yellow arrows by building your income streams and reducing your spending as much as possible.
Next you need to start building green arrows.
This means you must buy assets.
One of my favourite ways for building green arrows is through stocks.
You can start investing with as little as $1 with Sharesies.
If your income is at a level where you can look at investing in property, that's great too.
Crypto, P2P loans and businesses are all great investments too to create green arrows.
The key to building green arrows is consistency. Invest a certain amount of your income every week, no matter what.
Step 2: Start investing your yellow arrows into assets so they will generate green arrows. Create a plan (for example, investing 20% of every paycheck) and stick to it).
Once you start generating green arrows, remember the goal is to turn them into blue arrows.
Once you receive a dividend, reinvest it so you generate even more dividends.
When you earn interest, reinvest it to earn even more interest.
Eventually you will get to the point where you blue arrows are generating so much income you no longer need to work, and that income is growing every year.
Step 3: Reinvest your green arrows so they turn into blue arrows. If your blue arrows grow big enough, your wealth will continue growing on autopilot every year, where you are working or not. Blue arrows are the secret weapon to wealth!
How To Get Started
Remember, it all starts with the yellow arrows.
You need a source of cash flow, and more importantly, you need to spend as little of it as possible.
If cash comes into your bank account but doesn't get invested into green arrows, it's useless to you.
My start page has guides on many options for building your first $100 from yellow arrows.
Next you need to start building green arrows.
This means you must buy assets.
One of my favourite ways for building green arrows is through stocks.
You can start investing with as little as $1 with Sharesies.
If your income is at a level where you can look at investing in property, that's great too.
Crypto, P2P loans and businesses are all great investments too to create green arrows.
My start page also has guides on how to get started investing your first $100 in various green arrow assets.
The key to building green arrows is consistency. Invest a certain amount of your income every week, no matter what.
Once you start generating green arrows, remember the goal is to turn them into blue arrows.
Once you receive a dividend, reinvest it so you generate even more dividends.
When you earn interest, reinvest it to earn even more interest.
Eventually you will get to the point where you blue arrows are generating so much income you no longer need to work, and that income is growing every year.
Growing your first million will be just a matter of time!
Step 1:
Optimise your yellow arrows by building your income streams and reducing your spending as much as possible.
Step 2:
Start investing your yellow arrows into assets so they will generate green arrows. Create a plan (for example, investing 20% of every paycheck) and stick to it.
Step 3:
Reinvest your green arrows so they turn into blue arrows. Blue arrows are the secret weapon to wealth!