If you get up early and make good use of your time, you will have a higher-than-average income. If you commit to saving a significant portion of that extra income and check your net worth every month, your net worth will grow quickly. How quickly depends on three things:

1. how much you invest

2. how long you keep it invested

3. what rate of return you can get

The traditional idea about investment returns is that the more you want to earn the more risk you have to take. Today, I’d like to talk about how to get a higher-than-average return with much-less-than-typical risk.

Let’s start by assuming that you begin a 20-year wealth accumulation program with monthly savings of $1,000. Saving $12,000 a year should not be a problem for you even if you are starting out. It’s just a matter of doing what I told you to do yesterday.

Let’s make another assumption. Let’s figure that by working hard and smart you are able to increase that $12,000 by $3,000 a year. That is well within the reach of anyone committed to wealth building.

And finally, let’s assume you are 45 years old and have 20 years of income-producing years in your future. (If you are younger than that, the numbers I’ll show you will turn out to be much, much more favorable.)

Over a 20-year time period, putting away the savings mentioned above, the total “extra” income you’ll have socked away will be about $800,000. That’s not bad. It shows you the power of consistent savings.

Now let me show you the power of boosting your savable income. Let’s assume, again, that you started by saving $12,000 a year. But instead of increasing that amount by $3,000 a year, let’s say you add $6,000 — a modest $500 a month. In that situation, your accumulated savings will amount to about $1.4 million.

But let’s say you do better than that. Let’s imagine that your financially valuable skill allows you to increase the amount of money you can save each year by $12,000 ($12,000 the first year, $24,000 the second year, etc.). In that case, your 20-year saving spree will total $2,520,000.

Two-and-a-half million dollars is a lot of money. It would put you among the solidly wealthy. Not revoltingly rich, but financially independent.

You can definitely do that well by sticking to a straight money-building program. But the numbers we’ve cited so far do not include the effect of compound interest. They show what you’d get if you hid all that extra money in your mattress.

If you put all that extra money in the bank and earn an average of 3% interest over time, you’d have about twice the amounts cited above. If you could do better than that — say, 5% — you’d end up with four times that much. 7% would give you about five times that much. And 10% would give you about six times that much, or between $5 million and $15 million.

This demonstrates something you already know: If you can get your return on investment (ROI) up into the double digits and keep it there, you can get rich — even very rich,

It’s not easy to get 10% over time, but I believe it can be done if you invest in businesses you know.

Start by dividing your assets into four categories:

1. your home

2. secured loans

3. passive investments

4. active investments

You know what “your home” means. “Secured loans” include Treasury bonds, municipal bonds, mortgages (that you give, not take), and highly collateralized private loans. “Passive investments” cover the kind of things that most people think of when they think of investing. This includes individual stocks, mutual funds, options, futures, etc. The final category, “active investments,” identifies any investment you make in a business in which you play an active, often controlling, role.

Because I’m a strong believer in “diversified” investing (balancing your investments so that you don’t have too much money in any one area), I make it a personal habit to try to have a substantial amount of money in each of these four categories. In fact, if you want my recommendation, I’d say you should have no less than 10% and no more than 40% of your money in each category. For planning purposes, you might want to start off with the idea that you’ll have equal value in each category.

For each of these categories, you need to reduce your risk and increase your potential return. The way to do this is the same for all four categories: Invest in what you know and keep learning about what you are investing in.

Let’s see how this applies to your home. To be sure that your home appreciates in value, don’t buy a house until you really know the local real estate market. Spend the time you need to scout around, to speak to people, to watch what’s going on. When you are confident you know the good neighborhoods, the up-and-comers, and the overvalued properties, do what the real estate pros recommend: Buy a modestly priced house in an good or up-and-coming neighborhood. (We’ll talk more about this tomorrow.)

The next category — secured loans — is an important but usually overlooked part of any wealth builder’s investment portfolio. Secured loans are wonderful because they pay a decent rate of return — higher than bank savings accounts — with virtually no more risk. To make things simple, I recommend tax-free municipal bonds. If you go for the safe ones — triple A — you’ll get about 4.75% return today. That equates to about 7% to 8% before taxes.

Next, you’ll want money in the stock market. For reasons I’ll tell you about later, I recommend that you select a balanced mutual fund that is meant to “track” the Dow Jones Industrials. Don’t mess around picking individual stocks or timing your investments (pulling them in and out of the market depending on economic conditions and other factors). Just put your money in and let it enjoy the historic 9% return stocks have given investors for 70 years.

You can expect your home to appreciate at least 5% a year — twice that much if you’ve done your homework and have gotten to know your local real estate market. You’ll get about 7% on your muni bonds (before taxes) and 9% from your mutual funds. That means that three-quarters of your wealth probably will be appreciating at an average of 7.5%

Figuring that rate of return into each of the savings levels we talked about before, here’s how your 20-year nest egg would grow:

• If you start with $12,000 a year, increase it each year by $3,000, and get a 7.5% return on 75% of your investments: You’d have about $1.5 million.

• If you start with $12,000, increase it by $6,000 a year, and get a 7.5% return on 75% of your investments: You’d have about $2.5 million.

• If you start with $12,000 and increase it by $12,000 a year with a 7.5% return on 75% of your investments: You’d have between $8 million and $10 million.

What that means is that 75% of your savings will give you a 20-year net worth that will be higher than what you would have had if you had simply hidden your money away — and yet your risk would have been just as low. (Remember, hidden money can be stolen.)

What you do with the other 25% of your savings (the subject of tomorrow’s message) can make the difference between being financially comfortable, enviably wealthy, and disgustingly rich.

Anybody can get rich. It doesn’t take genius. Nor are special talents required. You don’t need to be lucky. And you certainly don’t need to be privileged. As “The Millionaire Next Door” (the best-selling book by Thomas Stanley and William Danko) and many studies have shown, most self-made millionaires are very normal in their circumstances. What separates them from the pack are their habits.

Becoming rich is a matter of making certain decisions and practicing certain skills, none of which is difficult or complicated. Viewed from this perspective, becoming rich is simple. You can acquire a multimillion-dollar net worth by doing just five things:

1. Get to work an hour early.

2. Make an above-average income.

3. Practice a financially valuable skill.

4. Invest a big part of your savings in a side business.

5. Invest the rest safely.

There are plenty of other ways to get rich, but the four above are proven. I’ve done them myself, and I’ve taught them to others who have become rich by doing them. Let’s take a quick look at these five “requirements.”

Secret #1. Get to work an hour early.

Most people want to be rich, but few succeed. The reason is not how much or how little they desire but what they actually do each day. Despite what the self-help books say, you won’t get wealthy by just wishing — or by positive thinking, imaging, visualization, and other mental tricks that promise overnight magic.

A good mental attitude will make you a happy person, but it won’t put any money in your pocket. To get rich, you have to give yourself an edge over everybody else. And the best way I know to do that is to get to work early. By getting to work early, you can do all the little things that put you ahead of the pack. You can make extra contacts, learn useful skills, take time to write an impressive memo, polish off a report, etc.

Early to Rise is designed to help you get rich (and successful) one day at a time. You start with a set of life goals and reduce them down to five-year goals, then one-year goals, then one-month goals, then one-week goals, and finally to one-day goals. In ETR’s daily messages, I ask you to do something, review something, remember something, or learn something that will get you one step closer to your ultimate goals.

Each thing I ask is relatively simple and small. It can be done easily and most often quickly. If you get into the habit of using ETR actively — not just reading it, but practicing its advice — you will make progress. I know this works, because I know dozens of people it is working for. And because it’s working for me.

But the things that I ask you to do are extra things that go beyond what you are doing right now. That’s why you need to get up an hour early each morning — so you have time to read ETR, plan your day, and get at least one positive thing done before you start doing all the regular things. The regular things will give you a regular life. The extra things will give you all the extras — including the extra millions. (I’ll talk more about this tomorrow.)

Secret #2. Make an above-average income.

You don’t have to earn a ton of money to become a millionaire, but you do need a higher-than-average income. It’s possible to become financially independent on an annual income of $50,000, but you’ll do so only if you scrimp and save for a long time. To get wealthy while you’re young enough to enjoy it, you need to make about $75,000 or more. When your income exceeds $50,000 (after taxes), you can save most of it without compromising your lifestyle. Since I can’t scrimp and save, I can’t ask you to.

It takes some effort to get your income above $50,000 but it can be done. (See Secret #3.) And when you break through that level, a very nice thing happens: Increasing your income to the next level becomes a little bit easier. And when you hit the next level — say, $75,000 — you can bump yourself up again with even less effort.

There is truth to the saying that the rich get richer. It’s not the truth most people take from it though. We’ll talk more about this and review ETR’s ideas for boosting income and living rich on Wednesday.

Secret #3. Practice a financially valuable skill.

A financially valuable skill is one that contributes to (and is recognized as contributing to) the profits of a business. By this definition, not all business skills are financially valuable. You need to help create profits, and you need to be sure that the powers that be see you as a profit maker. We’ve talked about this before, and we’ll talk about it again.

Secret #4. Invest in a side business.

If you earn an above-average income and don’t go crazy buying things, you’ll have money left over for investing. Investing is the best way to get rich — and investing in your own side business is the best way I know to get a higher-than-average return on investment (ROI).

I’m not an advocate of quitting your job, mortgaging the house, and jumping into a business. Although you may read stories about people doing that the odds are very much stacked against you if you try. You just don’t know enough — or have enough — when you start off that way.

I believe in “chicken entrepreneurship” — starting out slowly and learning about a side business while you have the safe and steady income of your main job.

Even if you own your own business, you should invest a large percentage of your savings in a side business. It’s simply the only way you can ever expect to earn 20% or more on your money with relative safety. By a “side business,” I mean something you can run on weekends or weekday evenings. It is something that won’t take your attention away from your full-time job. It should be something you enjoy and are willing to stick with.

There are all kinds of side businesses you can get into, from consulting to freelance writing to real estate. We’ll be talking about those opportunities on Friday — and I’ll give you specific examples of how to make money in real estate, something I’ve been doing pretty successfully for more than 20 years.

I’ll tell you what I’ve learned about real-estate investing and how you can gradually and easily put together a “portfolio” that can give you a very substantial yearly income — enough to retire on if you so choose.

Secret # 5. Invest the rest safely.

If you take advantage of Secrets #1, #2, and #3, you’ll eventually (sooner rather than later) have money left over that you won’t need for your side business. You should invest that money conventionally but safely. You want to keep the money you have worked hard for safe and secure, but you also want to earn the highest possible ROI on it. The difference between earning 2% on your money and 22% can be the difference between having a net worth of $100,000 and $10 million at retirement.

I’ll give you my specific recommendations for stocks, bonds, and other passive investments on Thursday. And I’ll tell you how to get the highest possible yields safely.

Then, next week, I’ll tell you how you can make really good money (and have fun) by buying things you care about. The secrets of real-estate investing are mostly the same secrets that make hobby investing — collecting art, antiques, beer cans, etc. — profitable.