Jeffrey Strain explains that, “The reason why you aren’t a millionaire (or on your way to becoming one) is really quite simple. You probably assume it’s because you aren’t earning enough money, but the truth is that for most people, whether or not you become a millionaire has very little to do with the amount of money you make. It’s the way that you treat money in your daily life.”
He then distills this into a 10 point list which, minus the helpful accompanying explanations, boils down to this:
- 1. You care what your neighbors think.
2. You aren’t patient.
3. You have bad habits.
4. You have no goals.
5. You haven’t prepared.
6. You try to make the quick buck.
7. You rely on others to take care of your money.
8. You invest in things you don’t understand.
9. You’re financially afraid.
10. You ignore your finances.
Ezra Klein, who probably isn’t a millionaire (Full disclosure: nor am I. My guess is that Strain isn’t, either.), finds this explanation insulting:
In other words, you’re not a millionaire because you suck. Because you’re un-virtuous. Because you could be doing better, but aren’t. It’s not because you work a low-wage service sector job, or because Jenny needed orthodontics work and your classification as a contractor doesn’t come with dental insurance, or because your division was outsourced. No, it’s because you’re a failure. Because you’re impatient, and lazy, and fearful, and slovenly, and self-conscious. And, the flip side is, all those folks who are millionaires didn’t get there by luck, or because they were born into a good family that could provide them with SAT prep and a private education. They’re millionaires because they deserve to be. That’s the key. We used to talk about the haves and the have-nots. Now it’s the deserves and the deserves-nots.
First, it’s rather silly to say that the reason you’re not rich is because “you work a low-wage service sector job.” That’s rather like saying that the reason people are starving in Ethiopia is because they’re not eating enough. Leaving aside the incredibly rare stories about the janitor who saved all his money for forty years and then donated millions, low-wage jobs obviously aren’t the route to financial prosperity. The question is why are some people in those jobs and others, who started in similar circumstances, doing quite well for themselves?
Few millionaires receive a wage at all; most are entrepreneurs who have created their own businesses and have been successful at it. Indeed, I doubt most of them went to private schools, or that their SAT scores had much to do with their accumulation of wealth. Conversely, most of the very-well-educated people I know work in relatively-low-salary jobs in journalism or teaching.
There’s not much question that some rich people are lucky. Supermodels fit into that category as, arguably, do professional athletes. Or, say, Katie Couric. And, no doubt, it’s easier to start a successful business if you are a Bush, Rockefeller, or Kennedy and start with a million dollars in seed money from your trust fund. Similarly, it doesn’t matter how great your choices are if you get struck with a horrible disease or get hit by a bus.
Strain’s column offers some really sound advice, though, in the aggregate.
- Don’t waste your money buying expensive cars, which don’t hold their value. Most of the self-made wealthy people I know drive Fords and Chryslers rather than Mercedes and BMWs. Most of the people I know who drive BMWs aren’t particularly rich.
- Don’t go into debt to buy luxuries you really can’t afford. If you really want a giant flat screen television, save up to buy it and pay cash. Bonus: The price will come down while you’re saving.
- Don’t waste your money on cigarettes, drinking, and gambling. As a young second lieutenant, I was amazed at how many of my colleagues lived from paycheck-to-paycheck while I always had money in the bank. (And, no, I didn’t have a trust fund.) The fact that I was driving a car that I bought for $700, cash, and didn’t blow $50 a night at the bar had something to do with that.
- Do financial planning! Put some money away for retirement and investment early, before you’re saddled with a mortgage and kids. And budget something for those things even then; you’ll never do it if you wait to do it with “whatever’s left over.”
- Plan for a rainy day! Jenny will in fact need braces one day. Get some insurance. Put some money in the bank. If you haven’t done this, you can’t afford the big TV or the new car.
I’ve been pretty good at doing these things, although my wife and I spend more money than we should on things like restaurant meals. For the first eighteen years or so of my working life, I was content to work for others for the safety of a paycheck rather than taking the risk of failure that comes from being self-employed. And, frankly, I’ve made a conscious choice to do the type of work that interested me and doesn’t pay particularly well rather than things that were more lucrative.
There people my age who didn’t have any great financial head start over me and who aren’t significantly smarter than I am yet are fabulously wealthy. A couple own professional sports teams. While there was certainly some luck at work, including simple differences in personality, they “deserve” their wealth because they took risks, created something of value that people were willing to pay a lot of money for, and invested wisely.
I’m certainly not going to pretend that they got rich and I didn’t through sheer happenstance or the inherent unfairness of the system. Indeed, taking that attitude pretty much insures that you won’t get rich.
