The other day I found myself browsing through my favorite internet time-sink (Youtube) because what else are we supposed to do during quarantine?
And well, that Youtube algorithm knows just what I like, because it served up a headline it knew I wouldn’t be able to resist:
“Mark Cuban’s Guide to Getting Rich”
As somebody who grew up in Dallas (home of the billionaire) and certainly interested in getting rich, this one checked all the boxes!
So, helpless as I was, I clicked the link to find Mark Cuban standing in front of a white screen, dishing out 2 minutes and 47 seconds of worth of his “9 rules to getting rich.”
As I watched, I found myself enthusiastically agreeing to many of his rules, feeling lukewarm about a few, and in total disagreement of others!
Oh, the controversy!
The only way to settle this score was with a blog post, exploring whether Mark Cuban’s 9 rules to getting rich are legit:
1. Live like a student.
When you get that first job… it’s really cool… I remember looking at cars going AAAH… I want that car. Fortunately, I kept my clunker.” – Mark Cuban
Bingo. You are probably tired of hearing me espouse the amazing, life-changing magic (Marie Kondo shoutout!) of living beneath your means. So it’s nice to see a billionaire have my back on this one.
For anyone who spent time in college, the “live like a student” advice is such a powerful frame of reference for a few reasons:
- We can probably still taste the ramen noodles from this lifestyle.
- We all know that truthfully, living like a student wasn’t so bad. In fact, most people refer to college as some of the best times of their lives!
Here’s why this is such good advice…
Sure, avoiding the temptation to buy a new car didn’t immediately make Mark Cuban one of the richest people in the world. BUT… living beneath your means is the foundation on which all financial success is built, so it’s no wonder why Mark put this rule first.
When you live beneath your means, you create breathing room for yourself. You immediately give yourself options. Options that people overspending on The Fancy Car can only dream about.
What you do with those options is entirely up to you.
- Maybe you use the excess cash flow to pay down the last of that annoying debt.
- Maybe you invest that money into a simple, relatively low risk strategy that all but ensures you’ll be able to become a millionaire and quit your job decades before your peers.
- Or maybe, like Mark Cuban, you use your lack of financial obligations as an excuse to create a couple world changing companies.
No matter what, it all starts with living frugally.
2. You shouldn’t use credit cards.
You’re better off using a debit card when you need to not use cash.” – Mark Cuban
I’ve heard Cuban talk about this before. His reasoning is that the interest rates on credit cards are so financially crippling, you’re better off avoiding the temptation entirely.
That’s good, safe advice. Nobody’s ever gonna end up bankrupt and destitute if they follow that strategy. And if you’ve got a debt problem or spending addiction, absolutely listen to him.
That said, I actually disagree with this one. Big time.
For those wanting to optimize their finances, responsibly using a credit card for all your purchases has a few huge advantages:
- Sign up bonuses that often range anywhere from $500 to $2,000 of free money.
- Depending on the card you use, a constant 2-5% sale on every single thing you buy. Considering the average person spends over $30,000 a year, that’s at least $1,000 a year of more free money.
- Buying via a credit card offers a ton of consumer protections, compared to using your debit card. When somebody rips you off and you purchased using a credit card, they’re stealing the bank’s money. You better believe the bank’s gonna come down on them with the force of an $18 trillion banking industry. More immediate for you, that means they just cancel the charge and you get your money back.
Last year, I took 7 round trip flights to everywhere from Jackson Hole, Wyoming to Yosemite National Park, California and barely paid a penny, thanks to credit card sign up bonuses and reward points. That’s thousands of dollars worth of savings.
3. Save up six months of income.
If something goes wrong, you’re gonna need at least six months of income.” – Mark Cuban
Classic emergency fund advice here. Again, this is good beginner advice that can be optimized depending on your risk tolerance and personal situation.
I still think that liquid assets, like a hefty portfolio of stocks and bonds, are the ultimate emergency fund. A lot of people forget they can use their Roth IRA as an emergency fund in a pinch, too.
With all the recent COVID19 stuff, having a good emergency fund plan is probably more important than ever.
4. Put savings into SPX Mutual Fund
I’d put [my money] into the cheapest Standard & Poor’s mutual fund that I could find.” – Mark Cuban
Bingo again.
There’s three key phrases in that statement:
- “Cheapest” – Mark is referencing the expense ratios, adviser feeds, brokerage fees, etc. that come with investing in stocks.
- “Standard & Poor’s” – He’s referencing the S&P 500, aka a basket of the 500 largest companies in America.
- “Mutual Fund” – Aka an index fund.
Mark Cuban is basically saying what my investment strategy is all about… finding the lowest expense ratio index funds and pouring money into them.
I’ve written about this all over this site. You can find more of my thoughts here:
- Why index funds are so much better than trading stocks.
- 3 Fund Portfolio: The Lazy Investing Strategy that Crushes the Pros
- Vanguard vs. Fidelity: Which is best for index fund investors?
- Vanguard vs. Charles Schwab: Which is best for index fund investors?
5. Invest up to 10% of Savings in High Risk Investments
If you’re a true adventurer and you really want to throw the Hail Mary, you might take 10% and put it into Bitcoin or Etherium. But if you do that, you’ve got to pretend you’ve already lost your money.” – Mark Cuban
Interesting perspective, and actually somewhat eye opening for me. When he said this, I realized I don’t have any “Hail Mary” type investments in my portfolio.
As I get a more stable financial foundation underneath me, it might make sense to explore some areas with potential for outsized returns.
Initial ideas for those:
- Cryptocurrency (Bitcoin, Ehterium, etc.)
- Investment into this website
- Startup capital for a side hustle/business that could one day earn millions
- Riskier small or micro cap stocks
6. Buy consumables in bulk and on sale.
It’s so hard to make a return on your regular investments. You’re better off buying two years worth of toothpaste when it’s on 50% discount. That’s an immediate return on your money.” – Mark Cuban
Another interesting way of looking at things. A lot of people write off “buying in bulk” for frugal moms or extreme couponers.
What Cuban is basically saying is this…
Say you’ve saved hard and you’ve got $5,000 to invest. You can:
- A) Invest that money into the stock market an earn an expected 7% on your money. On a $5,000 investment, that’s a $350 return in a year.
- B) Spends hours upon hours working your tail off analyzing stocks, so that you manage to beat the market. Instead of 7%, you earn 9%. On a $5,000 investment, that’s a $450 return in a year.
Hooray! Your investment prowess just earned you can extra $100! Call Warren Buffett.
Here’s the catch, though.
You could just as well put $100 in your pocket by buying two years of toothpaste at a good price, stocking up on meat when it’s 30% off, or any number of other bulk buys.
Which is easier?
7. Negotiate using cash.
I tell people all the time. If you’re out, you’re gonna take a yoga class and they’re gonna charge you $30 and you say, “look, I’ve got $20.” They’re gonna take it.” – Mark Cuban
Can’t say I’ve ever tried the yoga class example, but there’s an even easier way to do this.
Companies often get charged 2-3% for running credit card transactions. As a result, many companies have a policy of offering a discount for cash purchases. And many times, that discount is much more than you can earn from the credit card rewards points.
Some companies publicly post this discount, others you’ll have to ask. And some will tell you no, but it can’t hurt to try!
This really comes in handy on big buys. If you’re buying a mattress that your credit card only offers 1% cash back on, but the mattress company is willing to give you 5% off just for paying cash, well you just scored yourself a free dinner or three!
8. Read books
To spend $30 to get one idea that could help propel me and make my businesses better? It’s a bargain.” – Mark Cuban
Yes, read lots of books. And blogs too! 🙂
Cuban then goes on to throw another shout out to The Only Investment Guide You’ll Ever Need, which I reviewed after I heard him mention it on a podcast.
Another interesting trivia: Mark Cuban became a billionaire because he was originally chasing early retirement – an idea he picked up from a book. (I reviewed that book too.)
9. Nice works.
When you’re nice to people around you, when you’re caring, when you’re empathetic… you’re always gonna get more results.” – Mark Cuban
A friendly reminder from one of the world’s richest dudes that it’s not all about money.
What’s interesting though, and what Cuban is pointing out here, is that a little basic manners might help your money situation too.
As a small anecdote, I definitely attribute some of the multi-thousand dollar raises I got at work towards simply being well-liked around the office.
And what’s the best way to being well-liked?
Well, you could scheme and conspire. Or, you could just be genuinely nicer to people.
(PS – How to win friends and influence people is one of the best books on this subject. Recommended by Warren Buffett himself.)
What do you think of Mark Cuban’s rules to getting rich?
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Mark Cuban’s advice seem’s pretty practical.
I also understand there ha to be a bit of luck and things falling in to make it to that status.
I saw another interview where they asked Cuban whether he could become a billionaire again if he lost everything tomorrow. His answer, which I agree with, was that he and pretty much anyone could become a multi-millionaire with enough effort. But billionaire status takes a little bit of luck.
I watched this video a few weeks ago and enjoyed it. I think living like a student has helped me a lot. Not only with cutting down on spending, but also focusing on continual learning.
I have about 5% of my net worth in Bitcoin, Ethereumand Bitcoin Cash. Do you have any thoughts on investing in cryptocurreny as a “hail mary”? Or alternative hail mary investments?
I disagree with the no credit card rule. I had several credit cards (paid the bill off in full every month) and had to get rid of them because the bank said it made me a mortgage risk having so much credit available. So I ditched the credit cards and got the mortgage. Now that I would like a secured line of credit, the bank says because I haven’t had a credit card for the past 5 years, I’m a risk and I can’t get the secured line of credit until I’ve had a few credit cards for at least 3 billing cycles and paid off the bill in full each month. Infuriating. Get at least one or two credit cards. Use them responsibly to establish credit.
I agree, credit cards offer free money as long as you pay your entire bill each month! Credit cards offer a level of protection against scams online.
Another great article MW.
I wonder why all the rich people making money advice always recommend the same two somewhat misguided things.
1. No Credit Cards
2.Massive 6 month emergency fund
Neither of these pieces of advice are about building wealth or getting rich. They are about “not getting poor”.
At 23 years old, a small emergency fund might make sense but investing and building that up into a massive investment portfolio makes more sense. If you truly have an emergency fund can access this money, and it likely prevents the behavioral challenge of “fake” emergencies like a car, TV or Furniture upgrade.
No CC makes no sense to me either. Society operates on credit. If you want to start a business, guess what, a great credit rating is going to be a huge boost. If you aren’t entrepreneurial, guess what great credit could save you 7500 on a 240,000 mortgage over 25 years (if you were to get a 0.2% better rate).
Both these pieces of advise are super conservative and maybe for a true money novice, they make sense but if you educate yourself a bit, you can do better.
Regarding #6, your effective return is actually *far* higher than a 50% on a “1/3 discount” offer. Why? Because you get to both “earn” the return AND consume in the present time period (or any time period which suits you). With a normal investment the tradeoff you are making is to forego a level of consumption today in order to obtain a higher level of consumption in a future time period. There is no such tradeoff if you can negotiate bulk discount today. You get to have your cake and eat it. How much higher are these effective returns? Proof out the calculations and you might be surprised.. https://www.youtube.com/watch?v=2U_dfKGbLpY
Yay, billionaires are supporting reading! Apparently, I am just feeling a bit cheeky. 😉 His advice seems sound, obviously it has worked for him. I haven’t heard of investing 10% of savings in to riskier areas but I think that is interesting. A new idea to ponder while reading another blog post over my bulk consumed coffee. Can’t stop the cheek today! :))))))))))
I like No. 9 the best.
I think the 10% risky investments advice makes a lot of sense. I’ve been a little bit too conservative investing wise and only recently opened up the purse strings to about 2% risky investments. But if that part of your portfolio really hit a home run it’s going to be worth it in the end. Certainly some thing I might start to consider.
I really love Mark Cuban, and I honestly think most of what rich people say is true, they reached their level for a reason, it’s not chance. But it’s also important to take things with a grain of salt, and not just do whatever someone else says. Every person is different, every situation is different, so you need to take advice and use it as you see fit.