Mark Cuban didn't grow up wealthy. In his childhood, he reportedly sold stamps door-to-door and even offered disco lessons to help pay for college.
But he sold video portal Broadcast.com to Yahoo for $5.7 billion and became a billionaire by age 40. Mr. Cuban himself is currently worth $5.1 billion, and Forbes magazine ranks him an 8 (out of 10) in its own score. should To be the perfect candidate to teach others how to get rich.
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Cuban aimed to do just that in a 2015 article for Business Insider in which he shared two tips for getting rich. He starts off strong with the message that there are no shortcuts to getting rich, and continues the message to the end of his work. “I'm not saying this is a get-rich-quick scheme. This is a path to get rich.”
But if you dig a little deeper into his other advice, you'll see that many of his strategies rely on chance events that no one can control. If things go wrong, you could end up in a much worse financial position than when you started.
Here's how Cuban says you can get rich, why he's wrong, and what you should do instead.
keep cash on hand
In his post, Cuban said the first step to becoming rich is to stop spending. He advises people to cut back on credit cards, going so far as to say, “If you use credit cards, you don't want to get rich.'' The Cuban government's right to limit people's reliance on credit cards for everyday expenses can also be a great way to maximize spending power, if used correctly. The problem is that many people don't use their cards correctly.
If you don't pay your balance in full each month, you could end up paying 20% more on your purchases. However, if you can pay off all your balances in one payment cycle, you can take advantage of credit card cash back offers, perks, and discounts on purchases. And you'll also be working on building your credit score.
But at the heart of Cuban's advice here is solid financial advice: spend less than you earn, save as much as possible. From there, he suggests storing your savings on his six-month CD so you have cash available whenever you need it.
“You're not saving for retirement. You're saving for when you need cash,” Cuban writes. “Buy and hold is your worst game.”
learn business
“The second rule of getting rich is to be smart,” Cuban writes. This means learning the ins and outs of a business that you really enjoy. “Find the person you love most and get a job in a business that supports it.”
According to Cuban, you can wait for “a period of uncertainty and change in your business” before jumping in. It could be tomorrow, it could be decades from now, or it could never happen.
No one knows exactly what to do if that moment comes. Cuban, who knows his field well, will tell you, simply saying, “I've been saving up for this moment, so I'm going to be ready.”
read more: The average American middle class household income is: How do you save?
How to actually become rich in 2 easy steps
Cuba's get-rich-quick strategy may work for some, but it depends on hitting a home run at the right time. Perhaps some people like gambling, but there is a surer path to riches.
Step 1: Save
Cuba gets this part right. The way to get rich is to save as much money as possible. This could mean missing out on things like your annual holiday or having to make difficult choices about your 11 streaming services. But if your goal is future wealth, the best first action to get there is to save.
Also, remember that not all accounts are created equal when it comes to savings. If you want to keep cash on hand in addition to CDs, you should consider a high-yield savings account. Traditional savings accounts have interest rates of around 0.01% per year, but there are high-yield accounts with up to 5% APY. Put your money where it will continue to work rather than stagnate.
By keeping your money in cash, you may be able to jump on potential opportunities when they present themselves, but you'll also be missing out on other opportunities to grow your bankroll.
Step 2: Invest
If you really want to see your money grow, consider jumping into the stock market. Cubans may think of buy-and-hold as a “game of ducks,” but many people, including Warren Buffett, have made fortunes using the strategy.
For example, the tech-heavy Nasdaq has enjoyed an average annual return of 10.4% over the past 30 years, while the S&P 500 has returned a cumulative 875% over the same period.
Yes, there will be down periods in some years where you are likely to incur losses. But if you're investing with the long-term future in mind, smart investors also have the opportunity to pick up extra shares at underground prices.
Investors who bought the Nasdaq Composite Index Fund 40 years ago achieved a return of 4,198%.
That said, there is no definitive recipe for getting rich quick, either in this summary or in Cuban's strategy—even Cuban warns that there are no shortcuts to wealth. But long-term returns are more reliable, at least if you invest regularly in the stock market.
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This article is for information only and should not be construed as advice. PROVIDED WITHOUT WARRANTY OF ANY KIND.
