As you might imagine, we discuss a wide range of topics in the Millionaire Money Mentors forums.
One recent post there had an unusual amount of conversation around it. I wanted to share my thoughts on the topic as well as hear from ESI Money readers.
It started with a post titled “Why do some people never get rich?” and then shared a Quora answer from Andrew Ferebee (scroll down from the link if you want to read it).
The conversation went back and forth with many opinions and “I knew a guy who did this” and “I knew a lady who did that” sort of examples. Those are fine in many cases, but when you’re trying to answer a broad question and using specific, personal examples to do so, not much gets accomplished IMO.
One-off examples show what’s possible but are rarely answer a bigger question.
And before long the conversation had veered off into discussing luck versus effort with people generally taking sides one way or the other.
I like that topic, so to try and address it and the original question plus try to reach some general agreement, I posted the following…
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If I may, let me try to summarize this topic and attempt to get some consensus from it.
I’ll probably fail, but the chance of failure usually doesn’t stop me so let’s get to it. 🙂
The original question was this:
“Why do some people never get rich?”
I think the answer is two-fold, as we’ve debated here:
- Some people never get rich because of circumstances beyond their control conspire against them to keep them not rich (I won’t even say “poor”, simply “not rich” at this point).
- Some people never get rich because of the choices they have made and actions they have taken in their lives.
So in summary, both circumstances (luck, if you will) and personal responsibility are part of the equation.
How much are each part of the equation? I think that varies by person.
We can all cite people who have started with nothing to rise to great wealth. We can also name examples of those who had “everything” from the start only to end up penniless.
I think of it as two measures, one vertical and one horizontal (I’d draw you a picture if I was talented enough).
On one scale, there’s luck — from “bad” to “good”.
On the other scale, there’s actions (or choices) — from “poor” to “good”.
The first set is what happens to you. The latter set is how you deal with what happens to you (how you respond).
You can’t completely control the first (you can do things to improve your odds in some cases — for example, not smoking increases the chance of a healthier life) which is what makes it seem “unfair”. And honestly, it is unfair. Life is unfair. It’s unfair in so many ways that are less important than getting rich (like people not being able to feed themselves).
You can completely (for the most part) control your choices, actions, and (especially) attitude. This is where the difference can be made for anyone. Even though Joe or Jane may never be “rich”, they can improve their starting point in life and/or what would be expected by circumstances in life hitting them by the choices they make. Give a million people the worst luck in the world and some will crash and burn and others will find a way to grow and improve. The difference? Their choices and actions.
Now there is an ancillary question that is implied by the original question (and especially the discussion) and it’s this:
“Can anyone become rich?”
The answer to this is no. Not everyone can become rich. (By the way “being rich” is not a right FWIW.)
Why is this? Because rich is a relative term. I may be rich compared to my neighbor but he’s rich compared to a guy who lives in a poor neighborhood but that guy is rich compared to a guy who lives in a city in Africa and he’s rich compared to someone in the slums of India.
Here’s an interesting article on this subject. It’s not 100% accurate so don’t pull a line out of it to disprove it’s flawed and not useful. It is generally useful and I hope you can live with that.
Any way, once “anyone” can become rich, then “everyone” can. And once everyone becomes “rich”, the meaning of rich changes.
The definition of rich is “having a great deal of money or assets; wealthy.” But this is relative to what others have. Once everyone has the same, no one is “rich”, they are simply “average”.
So to try and get a little more specific, let’s consider this related (but much more to-the-point) question:
Can most Americans improve their net worth?
Or, if you prefer a different version:
Can most Americans attain a level of wealth that’s substantially above what they actually have?
The keys to these questions are:
- “Most” — Not every single person, but at least the majority if not the vast majority. We can all give exceptions to almost any rule so words/phrases like “everyone”, “all the time”, etc. are rarely helpful. What is the case for most people most of the time? This will give us better results IMO.
- “Americans” — Focuses on just US citizens. It would be easy to say most Americans are wealthy by world standards, so let’s keep things in the US.
- “Improve” — Be better off in the future than they are now.
- “Substantially above what they actually have” — A significant amount more than what they currently possess. For the purposes of this post I’ll deem “substantially” to be “twice” the level they have now.
The answer to both of these questions is clearly yes IMO.
Most people can improve their net worth and most of them can do it substantially. Why do I say this? Here’s how I get there…
We have all seen the numbers for years (decades in my case) of how terrible Americans are with their money. The vast majority of these results are because of the decisions they make (their actions) with their money. If they would make different decisions and take different actions, they would certainly improve their finances.
Now can they do this in a substantial manner? Let’s look and see where we are now and go from there.
NerdWallet gives average net worths by age. The overall average is summarized as follows:
The average net worth for U.S. families is $748,800. The median — a more representative measure — is $121,700.
The median at 65 is $266,400, so let’s use that as a goal. Double it would be $532,800 or, as I’ve defined above, “substantially above what they actually have.”
To end up with $532k at 65, assuming you start work at 22 and can invest at an 8% return, you would need to save/invest less than $1,650 a year for your 43 working years. At 10% you’d need to save/invest $900 a year. Note that this is the total amount of savings you’d need — if you were in a situation to get an employer match to a 401k, your portion would be less (and the difference made up by the employer).
So now we have to ask if most people in America can save $1,650 or $900 a year.
This Wikipedia article dissects income in America in a million different ways. The topline is this:
The Current Population Survey of the U.S. Census Bureau reported in September 2017 that real median household income was $59,039 in 2016, exceeding any previous year.
The Motley Fool gives a close but different number:
As of 2018, the average U.S. household income was $87,864, while the median household income was $61,937.
When the median is considerably lower than the average, it means that there are outliers on the top end. In short, a few people who make a lot of money boost the average. So $61,937 may be a more accurate representation of typical household earnings.
We’ll take the lower number to be as hard on ourselves as possible. Now let’s ask, is it possible for someone making $59k a year to save $1,650 of it (less than 3%)? Certainly it is possible. I would say it’s even relatively easy.
So with this alone, we see that most (over 50%) Americans can substantially grow their net worths.
But it’s way more than 50%. Can someone making $40k a year save $1,650 of it (4.1%)? Of course they can. We could go on from there, but you get the point.
So while not everyone can become rich (by definition) and not everyone can improve their net worth (circumstances will conspire against some to a level that no one could overcome), the vast majority of Americans can improve their net worth and get it to the point where it’s substantially higher than what they’d otherwise have.
How can they do this? By the decisions they make and the actions they take.
So what about the unfortunate ones that are left behind? What should we do (if anything) for them? Some options:
- Some people would say this is what their taxes are for. They pay a good amount in taxes each year and expect the government to allocate them to help the less fortunate.
- Some say politics is the answer. I’m just mentioning this and do NOT want a political debate here. But some people do think they can help the poor by changing policies.
- Some prefer to give out of their abundance to help those less fortunate.
Ok, so that was probably less than perfect but at least it’s an attempt to wrap everyone’s thoughts together and do so with facts. Let me know your thoughts.
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To give some specifics on how bad Americans are with money, here are a few posts I’ve written through the years:
- The Sad State of Wealth in America
- Finances of the Average American (2010)
- Finances of the Average American (2011)
- Most Americans Can’t Afford a $1,000 Emergency Expense
- Over 50% of Americans in Bad Financial Shape
- Americans Have Way Too Much Credit Card Debt
Some people disagreed with me despite my stellar logic and well-written response. Hahaha.
But none of them offered any contrary facts — just merely their opinions on the issue.
I’m willing to be wrong, but I’m gonna need a bit more than your opinion to change my mind.
To one if them who accused me of creating a straw man argument and questioning my conclusions (and yet offering no data to prove anything contrary to what I said), I responded…
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Prove me wrong with data and not opinions. Do you think someone who makes $40k a year can’t save 4% or less of it? Is there a laugh button on this site? I need it!
I have been following the financial habits of people for 30 years now, reading article after article on habits, trends, etc.
I have also counseled many (hundreds?) of people personally.
I have written for millions, talked to thousands on comment threads, and talked to other bloggers who have done the same.
So my findings are based on the facts (which I shared) and my experience (which is extensive).
Now prove me wrong with your data, expertise, or whatever else you have besides your opinion.
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Yes, we get snippy with each other now and then but it’s all good.
We’re family so we do fight but in the end we usually kiss and make up.
This led to some conversation on the fact that maybe financial education can help people become wealthy. To this I responded…
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I don’t mean to burst your bubble and I hope times have changed, but in my experience there’s a huge gap between what people say they want to do (and say they will actually do), and what they actually do.
Everyone wants to be wealthy, for instance.
But in my experience most (over 50%) won’t take much action because it requires time, effort, sacrifice, and so on.
I detailed what my wife and I dealt with here: If You Want What I Have You Have to Do What I’ve Done.
The key passage:
Many of you know that I got my personal finance start by counseling people in money/debt trouble.
My wife and I were part of a national organization that would refer people to us — those from our city — when they wrote in to HQ asking for help. We did this on a volunteer basis.
One of the policies was that we were not supposed to contact those requesting help. We would get a referral including the person’s name, address, and phone number, but they were to initiate contact. We were sent their info so we were aware that they might be calling. But we were not to call them.
Here are the rough results we saw over and over again through several years:
- Out of all the people who had taken the time to write the HQ for help and were then referred to us, a very small number (maybe 25%) actually contacted us.
- Of those who contacted us, once they found out the next step was 1) a meeting and 2) they actually had to do pre-budget work in advance of that meeting, only 25% of that group would go ahead and schedule a meeting.
- Of those who came to a meeting so we could discuss their spending/budget, only 25% or so would agree to come to a second meeting where we could really dig into the numbers, see how things were going (keep them accountable), etc.
If you’re keeping track, that gets us down to 1.6% of those who wrote in were committed enough to attend at least to two meetings.
The reason? Most of them wanted a fast fix.
They wanted a 60-minute solution to a 20-year problem. When it was clear that didn’t exist, they cut us off.
But those people were at least committed enough to meet us. Most didn’t even want to invest any time in fixing their finances.
In short, they didn’t want to do anything different but wanted their money problems to disappear.
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There was more conversation which went on, but I think you’ve got the idea.
So now I want to hear from you: do you think most Americans can become substantially wealthier than they become otherwise?
Whether you do or don’t, please try to use facts to support why you think like you do. Citing what your Uncle Joe did back in the 40’s is probably not going to be enough evidence to carry your point of view. 😉
“The average net worth for U.S. families is $748,800.” Is this a typo?
No. But the average is inflated by very high net worth individuals. That’s why they use the median number instead.
Hey ESI,
Is that the average net worth at age 65?
You can Google it. The article I link to lists net worths by age groups.
In response to the question, I can not speak for “most Americans,” but only for myself. The answer is definitely yes. In my individual life, I found that my “financial knowledge” was disproportionately affected by circumstances that I created by myself. As a result of my mistakes I willingly accepted my lot as normal and for many years continued to believe that nothing would change. As I met all my percieved goals, I did not want to “reach for the stars. No debt, enough money for expenses, what else was there to shoot for. As times changed, marriage, children, mortgages, etcetera nothing compelled me to ask for help, or seek “more,” Now that I am on the downward side, I have changed my habits, retirement does that, and my “financial sense” is more mature, and my net worth has significantly increased to a sum never thought possible by me so many years ago. Circumstances, not prevailing, I can say that everyone can, learn how to define their own values and how to make them possible. You might say, If I knew then, what I know now………..
There is no doubt in my mind that most people could spend less and save/invest more and become substantially wealthier. Much spending is discretionary even if people think that it is not. The interesting thing is that if too many people reduced their spending it would have an impact on employment which could lead to a downward spiral (the shrinking of the pie).
I think most Americans can become more financially secure/wealthier.
I won’t get off into specific politics, but I think aspects of our current financial/political system make it far harder than it needs to be for most Americans to do that. Or, to put it more positively — we could adopt a few changes that have worked in other developed countries/our own relatively recent past and make it far easier for more Americans to substantially improve their financial well-being.
I have never been a high wealth earner and have always been able to save money. The only time I was not able to do this was when I first had my son and was literally working for health insurance. I think it’s doable for most Americans to save, even if they don’t make a high wage, but most Americans like to live beyond their means. I think back to my daycare where the mom had a brand new home and three leased vehicles sitting in the driveway but then would complain about having to put things on credit cards because she was “broke.”
After pivoting the question away from getting rich to improving net worth, I’m left wondering “so what?” Let’s say someone has a net worth of $50,000, and they manage to squirrel away an additional $200 per month by moving to a smaller apartment or forgoing some discretionary expense. Their $2400 per year in extra savings isn’t going to dramatically improve their living situation after they stop working.
So your assertion that “most” people can improve their net worth by changing their spending behaviors leaves me wondering so what?
In the US, social safety nets are already frayed, and showing no signs of improving. You mention three ways to address those who are less fortunate, including government distribution of taxes that are collected, policy changes and charitable giving, and say you don’t want to go down the political rabbit hole by discussing policy changes. As an FYI, the first two are the same – policy dictates both taxation levels and what is done with those taxes.
But still, I’m not sure the statement, “most people can improve their net worth”, has a lot of teeth unless there’s a reason why behind it. My $0.02.
You see the social safety nets as frayed. I see many of them woven together to become a hammock for some people. It is all in perspective. I see it as the choices we make and the effort we put into it. Then add a little luck into the mix. I have no hard facts. I just see better results for those that put in some effort. GREAT results for bigger efforts.
Actually I answered the first question FWIW. Then I moved on.
The “so what?” is hope.
If the question is “Why do some people never get rich?”, the answer can lead people into a pessimistic state of mind. It goes this way: “Some people never get rich. So I probably won’t be rich. So I shouldn’t even try to improve my finances. What’s the use?”
If the question is “Can most Americans attain a level of wealth that’s substantially above what they actually have?”, the answer inspires hope. It goes this way: “Most people can become wealithier if they apply a few, simple financial principles. That means I can probably become wealthier as well. I’m going to give it a try.”
Hope inspires people to positive action that then makes a meaningful impact in their lives.
I have seen both of these scenarios play out more times than I can count in the now 30 years I’ve been coaching, writing, teaching, and studying about money and personal finances.
As we all probably know, success with money can be as much about the mental aspects of it (if not more so) than the practical tips of managing money. It’s one thing I think Dave Ramsey gets really right: he focuses on feelings/emotions in making people better with their money.
Giving hope is the first step in te process, and that’s the point of this post.
As for your question about savings, the person saving $200 a month ends up with $621k after 40 years at 8%. It’s over $1 million at 10%. Do I think that will “dramatically improve their living situation after they stop working”? Yes, I do.
I started saving $200/month in my 401K over 25 year ago. Every raise I received, I bumped up the savings. Now, it is a seven figure amount. It planted the seed to start saving and made it easier to save more when I could.
If you don’t start saving, then how can it grow?
so the reason why one should want to increase one’s net worth would be 1) to have greater assets in retirement so as to be able to take better care of oneself and one’s family, which would lead us to the next reason, which would be to 2) be less of a burden/draw on the public treasury and its associated programs. and this statement: “Their $2400 per year in extra savings isn’t going to dramatically improve their living situation after they stop working” is simply wrong. if a 25 year old improves his savings by 2400/year until he’s 55 at an anemic 7% return, he has a quarter million dollars more at age 55. how is that not meaningful? if that same 25 year old improves his savings by those same 2400 dollars a year until he’s 65, he has an extra 800-900k lying around. (or an extra 40-45k/year forever and ever and ever) how is that not material? regardless of politics/policies and nets vs hammocks, your statement suggests difficulty with math. and an extra 200 a mos is easy for all but the poorest. meaning, with a little discipline, focus, purpose, and a calculator handy, today’s 25 year old can be a millionaire by the time he/she is 65, easily, for less than the cost of most car payments.
My answer is, for the vast majority of Americans, yes they can have far more in net worth after working for 10-40 years. First words I love to use when counseling others, is, SELF deprivation, in your younger years. Saying no to material things, however, is NOT an American “mainstream” ideal. Sad. Really sad.
My Dave Ramsey favorite quote is: “Live like no one else, then later on, you will live like no one else”. SO very true. That is what my wife and I did. Not that hard to say no. You have said “no” to your children hundreds of times. Why not to yourself??
Upon retirement from the military, we were pretty set. I still worked a second career for about 15 years. I have found out that many retirees from the military, after 20 or more years, MUST find a job right away. THAT is SAD. They lived paycheck to paycheck for all those years. You have to ask why is that. They never deprived themselves of material things. Sad.
Been retired for almost 6 years…..yes, no part time paid work…and our net worth is higher, even though we have spent (and given) over $100K of 401(k) funds. We find that incredible. Hardest part for us is to become spenders vice savers. We are working on it.
We love to volunteer our time with certain charities. Trying to give back. We will give much of what we have to charity. We are blessed.
God’s blessings to all of you, Steve
I think most Americans can become substantially wealthier than the circumstances that they were born into. BUT I also think that many of the worse off circumstances, as you stated make the chances much much less slim. The unfortunate cycles of abuse, drugs, and prisons really set the poor back more than even we realize.
Anyone born into fortunate circumstances has a HUGE advantage. But even that is not enough, because our culture is literally based around the religion of Capitalism and Consumerism. So until we all realize that this is an actual religion and something that we are being programmed for, it is near impossible to actually get off that rat race (I thank the book Sapiens for opening my eyes to this).
I think many of us are fortunate to find the right book, or see our parents set either good and/or bad examples with money that open our eyes.
Anyways, I think that a majority (most) of Americans can become rich. But I also think the odds are against many who are born into unfortunate circumstances.
Definitely a shade of gray situation. I have indepth behind the scenes exposure to the financial situations of about ten people from different cross sections of society(a story for another day) What I see spreads from unfortunate issues like illness that holds someone back to poor choices. I do see the poor choices out number the adverse event situation. Now one can argue this is ancidotal and my bubble has a limited cross section of society. No disagreement. But it also indicates to me, regardless of percents, that there are a massive number of people out there shooting their financial future in the foot. Ie these family and friends are not exceptional in their experiences. I believe you have to fix both the personal aspect and build the safety net if you want to be successful. Ignoring either will lead to the same result. Outcomes in other countries with larger safety nets indicate eliminating the problem entirely is a pipe dream. But together you can move the right direction.
Throughout my career I did payroll or was responsible for payroll/benefits/human resources. I could indirectly see which employee took personal finances seriously. Across all salary levels, I could see who directed deposited paychecks into savings account, or split between checking and savings accounts, who took the 401k match and who maxed out the 401k. These activities indicated to me the employees were building net worth all along the salary spectrum. Anecdotally, these employees were usually the best employees!
I am not surprised! Though I did once have an employee who was in such a good financial situation that it took us three months for him to figure out that we hadn’t paid him after a payroll snafu. He wasn’t the best employee, but he did work hard.
Here’s an anecdotal situation that might be relevant. We hire a caretaker through an agency that watches over our special needs kid. IMO, the job is pretty easy and the only real requirement of the job is to keep an eye on the kid so she doesn’t hurt herself or destroy property. The gig is for about 6 hours per day, 3 days a week and pays around $18/hr. The caretakers taking these jobs are generally strapped for money, have said they really need to work and have asked for more hours. Our current caretaker decided to take an extra week off to take care of personal needs and was OK doing this because her stimulus check came in. And when she came back, she decided to “treat herself” by taking a cab to work vs taking the bus because she had some extra money. I had another past caretaker asked about how she could work in a job similar to mine (I work from home a lot and make much more than $18/hr.). I told her it takes years of college schooling and over a decade of practical work experience to get the type of job I had. She had the impression it wouldn’t take very long to qualify for my position.
IMO, many of folks need the right role models constantly present in their lives in order to instill “good money habits”. It is unfortunate that many folks with bad money habits grew up with parents/friends/family that had bad habits. And when they became adults, continued to socialize with friends/colleagues/family that have bad money habits and assume this is the normal way to behave.
Statistically , greatest indicator of how a citizen in the U.S. will do (in most anything) is the zip code where they were born. Yes , there are outliers – some do better and some do worse but this is a fact.
So can anyone get rich in America? No.
Can “most” do better or advance their economic position with discipline? No.
Can someone get “rich” in America who was born into poverty or adverse conditions ? Yes. (But not most).
Americans as a collective have huge amounts of debt, and low amounts of retirement savings. Some are in this situation because of lack of discipline but some are there because of circumstances they can’t control or change.
Those are a lot of opinions with zero facts/data.
Pure pablum.
If these are just opinions, then a disclaimer might be in order.
Most people reading this site are probably interested in learning about the causes of wealth accumulation. Correlation is much easier to start with.
Is it possible for anyone to save $1600 per year for 40 years? Sure. However, the simple math assumes smooth, predictable income for 40 years. Does habit and discipline overcome instability? The Department of Labor reports that the average person changes careers 3-7 times and has 12 jobs during their lifetime.
My hypothesis about wealth accumulation is based on ideas that occurred to me while reading “The Millionaire Next Door”. Do everything in your power to smooth out your income. Do not make drastic or frequent changes. The military is a good choice for some. Otherwise I can’t think of any jobs that you can retire from after twenty years except federal government jobs.
If you’re looking for the signal in the noise, then I think it’s consistency.
This a great topic and the discussion in the MMM (Millionaire Money Mentors) was quite divided and anyone on the fence regarding joining I would highly recommend as there is no way you will not 10X any dollars you pay once you see the content and information available.
As far as the topic above, I came to the US (from Canada) in 1996 (26 years old) and was $20K in debt and my first job here was $28K USD and I was a Millionaire 10 years later and currently worth $13.4M so definitely know it is possible.
Millionaire 73
https://esimoney.com/millionaire-interview-73/
Ditto, but came from a third world country to HCOL US city in childhood.
No other country would I consider the land of opportunity, still. People should appreciate the opportunities they have here even if they have not seen first hand the hardships in making a life for yourself elsewhere around the world.
…BUT you have to want it and put in the effort. If you do, YOU are the anyone that can be “rich”, whether financially or in purpose. Don’t ever let anyone convince you otherwise, lest you become your own glass ceiling. Utilize every advantage you have, work around your disadvantages. Surround yourself with those that have achieved what you want to and dissociate from those mired in negativity or immorality. Learn, plan, execute. Take a fall (and you will) but take it as a lesson simply to take you to the next level moving forward.
Of course you can! Personally not seeing the controversy here unless you let others dictate your frame of mind. Track your own course with laser focus and make adversity a mere speed bump, not a wall.
The road to “substantial and sure” growth of wealth is long and slow.
Most people may not see the path, even the well educated.
In many aspects of life hurdles are in the way for improvement. On the job many people keep working in a job situation they really would like to quit. Many people stay in personal relations eventhough they would like to change partners. Many people wanting to live at a different place, remain where they currently live.
With the right guidance I think most people can change behaviour and see things from a new perspective. Get the motivation to improve their situation and establish new long term habits or circumstances for themselves.
For financial improvement, I believe many people in a predicament may have the interest and understanding to improve. But also that ecomonic sense is an intelligence just like spatial, or logical. Combining with different aptitudes of mental ability, the latter may be a stronger hindrance than anything else.
I think a majority of people have the means in their life to save for their future self a healthy portion of wealth. As mentioned in orevious posta on this forum, this skill is just not tought. It is needed to be learned, acquired and matured into.
I wrote a personal perspective but realized you really want facts. I’ll just say this, I grew up poor now I’m not. I worked hard and was prepared when luck came my way. I needed both to reach the level of wealth and success that I have.
So from the internet.
According to data from CreditDonkey.com, the average individual credit card debt stands at $5,331. Additionally, every month, most Americans don’t pay their credit card balance in full – 55% don’t regularly pay in full.
47% of Americans have credit card debt.
I was 45 when I got a nice car, 35 when I got my first nice watch.
When I see young people wanting everything now I cringe. So little interest in putting your head down and waiting.
Lastly from a great article on success vs. luck by James Clear found on google.
You can control the slope of your success but you can’t control your starting point.
As a general rule, the wilder the success, the more extreme and unlikely the circumstances that caused it.
Relative success is largely a result of hard work, extreme success or absolute success is much more driven by luck.
So I agree and conclude everyone can change their relative success and wealth but not everyone can be rich. One could work hard but never get lucky, they could work hard but be annoying and off putting.
The harder you work the less luck you need.
I think your thoughts on the subject are reasonable and comprehensive enough for the majority of Americans. If people made saving and investing more of a priority throughout their lifetime, chances are they will be substantially wealthier than if they hadn’t.
The statements “how you deal with what happens to you (how you respond).” and “You can completely (for the most part) control your choices, actions, and (especially) attitude.” are relatively universal truths about success in general. It applies to all areas of your life……….relationships, career, finances, faith, etc.
Regarding this statement, “They wanted a 60-minute solution to a 20-year problem. When it was clear that didn’t exist, they cut us off.”
It sounds like my dental practice.
Patients complain that I can’t “fix” their mouth in an hour even though they’ve been neglecting it for 20+ years.
EVERYBODY wants a quick fix whether it’s building wealth or fixing their grill!
That is funny, BIG Jeff!
People also want to lose weight or get fit quickly as well, despite years of neglect.
Here are facts from the Brookings institute: in order for a young person to escape poverty as an adult it helps significantly if they do 3 things: at least finish high school, get a full-time job, and wait until age 21 to get married and have children. Also, if they never quit one job until they have another this helps and, for girls, avoid having children out of wedlock.
*My add: think of yourself as a powerful agent of your own destiny and never as a victim….no matter what happens to you.
Moving away from the lowest common denominator, here is how I had to kick myself in the rear and stop making stupid choices such as carrying credit card debt for years. I finally accepted that I need to spend less than I earn, pay all of my bills on time (aka. Avoid late fees), save enough to cover at least 6 months of bills in case I lose my job, ensure that I have proper insurance in case anything should happen to me as I bring in most of the household income, set financial goals and actually hold myself accountable (aka. Stop buying stuff I don’t need!), and know my credit score and do everything I can to improve it (which requires understanding what affects it). Boring….but darn effective.
15 years ago I sought the material, overspeant each check, and led an average path. Then some major life pain points kicked me into examining my choices/upbringing, seeking an actual rather than assumed financial education, and choosing to take action on those reflections rather than despair. … Now I’ve eliminated a significant negative net worth, have bucket savings/investment pools/executable plans, no consumer debt, and live a much lower stress lifestyle. I work half the hours, on only work I enjoy, with a coast Fi account fully funded (at retirement age) for each kid and I. Sure, I now drive a $1500 250k mile Honda rather than an always new 40K German luxury cruiser…. eat out only 1x a month…. Etc. Yet, I can now claim contended happiness. The best part…. Applying these same financial viewpoints to health. So yes, the average American CAN choose to better themselves…. But for me it took a serious stimulus to switch gears.
I think becoming rich is a decision: a decision to forgo buying something today so that you can save for tomorrow and build wealth. Unfortunately America is a land of instant gratification and that is a direct contradiction to building wealth. The allure of keeping up with the Joneses with purchase after purchase is a guaranteed ticket to never becoming rich. ‘Appearing rich’ is more important to many people than actually becoming rich.
On the other hand, people who actually become rich deal sometimes face another problem: you can buy whatever you want except good health, a meaningful life, friendships, and the love of others.
Can anyone become rich? – Yes, in America this is possible. I can say that qualitatively being an immigrant!
Will anyone/everyone become rich? – No! For by definition, wealth is always relative and in any case, as we have all read above, people don’t want to put in the effort but want to become rich. I guess this is why lotteries are still around.
Should everyone become rich? – Again no! Except for a select few, unearned wealth does not end well.
We frequently look at the data and don’t think about the historical and ethical/moral perspective. They also teaches us, if we care to learn from it.
History tells us that countless empires built brick-by-brick, war-by-war failed when the hereditary rulers who inherited the unearned empire+wealth failed to appreciate what it took to build that, were downright incompetent, had no vision or sense of leadership to rally people towards a greater goal.
Countless families suffered the same fate, one person works his ass off, builds something of value, creates generational wealth but the scions and heirs spend it all away on trinkets, alcohol, drugs etc., get conned out of it or lose it to bad decisions and judgment.
Similarly, stories abound of people who won big prizes from lotteries, or sports stars who earn the big bucks barely out of college or high school only to end up broke.
Morally – all scriptures and religious texts I have looked at acknowledge the need to survive means collecting resources (which we call wealth) to take care of ourselves and our families. They also warn against greed and avarice.
Do we as people learn?
I believe people can do much better than they do on average, but they have to know how make and accept differences in their life.
1. Take care of your landlord’s property and always rent from private parties if possible. I ended up owning a house I rented for 12 years. When she sold it to me she gave me a great deal and the house quadrupled in value.
2. Learn to cook. I eat like a king for less than $80 a week for three meals a day. Skip processed food.
3. Take care of your stuff. I’m still using kitchen equipment I bought 40 years ago.
4. Never lease a car unless you can write off the payments. I keep my cars for 200,000+ miles and go at least 6 years without car payments.
5. Always ask for a deal if you can. For example, yearly fees on credit cards will be waived by most credit card companies If you have a good track record.
My baseball coach used to say that you will not hit a home run if you never take a swing. Whether there is luck or skill involved, nothing will happen until you decide to swing that bat. Once you do, you will have a 100% better chance at hitting a home run.
So the decision to act is in itself the answer to the question. I think that most people in this country will never attempt to take active control of their financial situation. They will not take a swing. The competition for opportunities and good jobs is thus greater for those that do take the swing.
And the chance to become rich will be a reality for those who do.