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What are the introductory stepping stones to financial success?

I often write on Quora.com, where I am the most viewed writer on financial matters, with over 571.1 million views in recent years.

In the answers below I focused on the following topics and issues:

  • What are the introductory stepping stones to financial success?
  • How terrible would it be for a millionaire or billionaire to live a middle class lifestyle?
  • Are ‘developed countries’ overrated?
  • What are the risks associated with investing in the American stock market as a Saudi Arabian resident?

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What are the introductory stepping stones to financial success?

You mention introductory steps.

This is one of the key things. Get the basics right.

Many of us heard the saying don’t try and run before you can walk as kids.

It can be true in financial maters as well.

The very basic steps are:

  1. To learn some income-producing skills (invest in yourself))

This could be a hard-skill, such as becoming a doctor or engineer, or a soft skill such as management or sales.

Ideally, even if you learn hard-skills, you should learn soft skills such as negotiation, marketing and sales as well, because it is more difficult to replicate.

There are millions of doctors in the world.

There are only a handful of doctors who know how to market themselves like “Doctor Pimple” who has millions of YouTube subscribers.

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And yes, that includes doctors who can speak seven or eight different languages.

2. Keep improving that skill

Once you have a skill, don’t stand still.

Invest in yourself, and your skills.

This is especially important in a fast-changing world.

Being good at marketing a business in 2010 wasn’t the same as in 2023. I imagine 2030 will also be quite different to today.

Once you have reached a certain level of experience and skill, starting out by yourself makes sense, either as a self-employed person or business owner.

3. Be persistent

There are many people who have skills, including hard skills.

Fewer have hard and soft skills.

Even fewer have hard and soft skills and personality traits like persistence.

Even though these things are linked to people’s character, they can be improved with time.

4. Focus on what can be scaled

Nobody can scale their time beyond 24 hours (less including sleep).

Once you have a system that works for you, outsource and automate.

Going back to the Dr Pimple example, what is the difference between her and 99.9% of doctors?

She has a social media marketing “empire”, which means that she gets new patients from videos she made years ago.

You can scale that more easily than advertising the old fashioned way.

5. Invest

Investing in yourself is vital in the early stages of life, and continuously.

However, investing in private investments makes a lot of sense too.

Almost all self-made wealthy people get there from starting businesses and making private investments into assets like the stock market.

If you start at a younger age, you are more likely to succeed due to compounding.

6. Limit your spending (relative to income).

Earning more due to investing in yourself is pointless if 100% of that extra income goes on spending, and not on buying assets.

Once you have got the basics, you can also consider things such as using leverage sensibly, which is linked to another thing – understand risk.

Take plenty of risks, especially when you are younger and can afford to take them, but also don’t be reckless about it.

How terrible would it be for a millionaire or billionaire to live a middle class lifestyle?

A few years ago, I met a man who was teaching English overseas.

His salary was fairly moderate – maybe around $3,000 a month.

There was nothing about his behaviour or tastes to indicate that he was wealthy, apart from the fact that he liked golf, which in reality is more middle-class than “elite” in most Western societies anyway, whereas in China few teachers play it.

He didn’t drive a car, probably due to the hassles of passing a test in a foreign country, and just took one foreign holiday a year.

Anyway, I found out that this man has a multi-millionaire dollar fortune. Not $10m+ but more like $2.5m-$3m.

Adjusted for prices 10 years ago that is around $3m-$4m in today’s money.

The reasons were:

  • He has always had a job. He hasn’t always been well paid, but he largely avoided those times out of work, divorces and other things which affect finances.
  • He is middle-aged so has had time to compound returns.
  • His spending habits are moderate
  • Good investment decisions were made over the years.
  • He got lucky once or twice. So, he got into Shanghai real estate just before the government stimulated the housing market as a reaction to the 2008 Great Recession.

He didn’t want to retire because he enjoyed his job.

Over half of his money was in illiquid assets like real estate and a pension.

Therefore, even if he wanted to retire at 55, he would have had to sell out and downsize.

He is just one example of millions globally.

Being a multi-millionaire merely means you have millions in assets.

It doesn’t say anything about

  • How liquid the assets are (how easy is it to sell). Having $3m in assets that can easily be sold (cash, bonds, stocks, ETFs etc) isn’t the same as having most of it in pensions, private businesses and real estate
  • The income you are currently getting
  • How much income the assets can generate for you

Remember, if the media says “such and such a person is worth $20m”, that could mean their private business is valued at $18m and they have $2m in houses and other illiquid assets, and close to $0 in liquid assets such as cash and investment funds/ETFs.

There are also loads of middle-income wealthy people, and plenty of high-income people with close to zero wealth.

What is true is that above a certain threshold, maybe $10m+, it is more likely that a person has both a good income and wealth.

So, the majority of millionaires do just live ordinary lives, as many others on here have commented.

We see this in the data too.

The average decamillionaire drives a car like this – unless driving cars is their passion.

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Ultimately, the best measure of “practical wealth” is somebody’s liquid net worth and how much income they could generate if they retired tomorrow, or how much income the investments are currently generating.

That excludes most millionaires from being seriously wealthy, as most have the money in houses, pensions or small businesses.

In this case, half of the time they “need” to live a middle-class lifestyle, as they don’t have the funds to live extravagantly.

Having a $2m home + $1m in a pension doesn’t allow you to spend 300k a year if your salary is 150k before taxes!

Are ‘developed countries’ overrated?

I presume you mean over-rated in the economic sense.

It depends on what you are looking for.

For many wealthy people, the answer is yes, they are over-rated, at least once you have made your money.

Many people do things for status.

Yet we live in a global, online, world, where you can live a good life in many countries.

This is especially the case now that conveniences allowed by technology (good Wifi, Uber etc.) exist in most countries.

Therefore, a wealthy person can live just as well in Kuala Lumpur as in London, with fewer expenses and taxes.

Crime is lower, and now healthcare is much better than in the UK, Ireland and beyond.

It also isn’t poor. It is mid-income, with all the conveniences of a developed country.

Like most mid-income countries’ capital cities, it “feels” like a developed city in a developing country.

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This is what $3,000 a month buys you in some parts of New York

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In Malaysia or Thailand, you could stay in a villa or in a penthouse in the best parts of town for the same money.

But saying you live there doesn’t sound prestigious to people. Many people want to prove they have “made it” by living in places like Monaco, the South of France and London.

You even hear people, most of whom aren’t wealthy themselves, saying ridiculous things about people they know, such as “he wouldn’t live in X and Y country if he were really wealthy”.

The reality is that Geographic Arbitrage is a great way to save money, pay fewer taxes, learn new languages and skills etc.

That is one reason why more retirees, business owners and digital nomads are taking advantage of Geographic Arbitrage.

Where developed countries aren’t over-rated is:

  1. If you are the majority of salaried workers. Unless you have a very niche or high skill as a salaried worker, you can usually make more money in the developed countries.
  2. If you are coming from a very dangerous or extremely poor country. It is a very different thing coming from a safe, mid-income country, like Thailand and Malaysia, compared to a war-torn country.
  3. Most developed countries are more advanced regarding racial issues and much else. So, for many non-financial matters, they aren’t always over-rated.
  4. If you are born in a developed country, but then travel and live overseas, that is a bigger advantage than being born in a developing country and coming to a developed country.
  5. If you don’t live in a good area in a developing or mid-income country. Living in the capital city in a developing country isn’t the same as living in the countryside.
  6. High-income, low or no direct tax places, such as the UAE. In that case, the tax benefit has to be accounted for. It can be indirectly cheaper to live in Singapore or Dubai, compared to even some very cheap countries, if you factor in the tax saving, especially if you are wealthy or high-income.

If you deny that you can live a better life, in some cases, in developing countries, you have to answer a simple question.

Why do Thailand, Mexico, Turkey and some countries in Eastern Europe, get so many health tourists from developed countries?

Why is it also the case that many expat organisations, such as InterNations, rank Mexico and Malaysia above most European countries for average expat satisfaction?

What are the risks associated with investing in the American stock market as a Saudi Arabian resident?

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The same ones everybody faces which is:

  • If you invest in individual stocks, the risks are higher than the indexes
  • If you hold even the indexes short-term, the risks aren’t as low as holding long-term.
  • Yourself. Most people want to invest when markets are doing well, and invest less when they are struggling and going down.
  • There is a small risk of US estate taxes/death taxes, if you don’t buy the US indexes domiciled in overseas markets.
  • You need to diversify. So, being 100% in the US market doesn’t make sense. International, non-US, markets, can sometimes outperform. An example of this was during the 2000–2010 period.

So, the biggest risk isn’t investing itself, but how you do it, and controlling emotions.

The only added risk overseas is currency.

This isn’t a big risk for Saudi-residents as the currency is pegged.

So, unless that peg changes, it isn’t something to worry about

For expats living in other countries where a peg doesn’t exist, it can be a risk though.

Even then, it isn’t a huge risk though.

US firms are also global, so a weaker dollar would just push up the returns.

Look at Starbucks, Apple or Amazon.

Most of the revenue is now international, and not Dollar based.

Pained by financial indecision? Want to invest with Adam?

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Adam is an internationally recognised author on financial matters, with over 760.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.

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