10 Reasons You Aren’t Rich

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.

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James Joyner
About James Joyner
James Joyner is a Security Studies professor at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. M1EK says:

    Ezra’s underlying point is that it’s effectively impossible to put a non-trivial amount of money away if your kid is sick and you lack health insurance, for one obvious example.

  2. James Joyner says:

    it’s effectively impossible to put a non-trivial amount of money away if your kid is sick and you lack health insurance

    Sure. Then again, if you can’t afford to buy health insurance, it might be advisable — from a strictly financial standpoint — not to have children. Indeed, most people who become wealthy tend to postpone marriage and family considerably longer than their non-wealthy counterparts.

  3. The secret to financial success is to spend less than you earn.

    That is a lesson that my father taught me and one I am teaching my children. Following that advice won’t guarantee you will become a millionaire, but it should keep you out of bankruptcy. People spend a lot of money on things that they don’t really ‘need’, but rather they want. And there is nothing wrong with satisfying some of your wants as long as you have built up the financial reserves to do so.

    I went to public schools as did my father and as do my children. But my father left home with his parent’s blessing to go to high school because the small town he lived in would have been a non-starter for higher education. My parents made sure that when they looked at housing, the school district’s reputation was a major consideration. My wife didn’t understand why I was so insistent that we get a smaller, older house in a good school district rather than a bigger, brand new house in a poorer school district. Now that she sees the education the kids are getting, she understands.

    Like James, we missed out on some of the “wealth making” opportunities in the 90’s because we concentrated on preservation rather than expansion. We paid of our first house. That provides security even if times get hard.

    My wife bought her first car while my parents gave me one of their old cars when they bought a used one. We both drove that car long enough that we could afford to pay cash for the next car. By saving the money that would have gone into a car payment, we not only avoided the interest of the car payment but also earned interest. The result is that when we need a new car (usually at about 100,000 miles on the old one), we have the cash to buy it outright, continuing the cycle.

    My first job was at age 9 earning about $10 a month delivering a small town paper. I’ve worked as an usher in a movie theater, flipped hamburgers for MacDonalds, sold clothes for a huge retail chain, worked the grave yard shift as a security guard, etc. All of those were ‘low wage service sector jobs. But I learned something from each of those jobs. When I went for my first professional job, I had a work history and references of people who had seen me work. I didn’t see those jobs as beneath me nor the end of the road for me.

    The vast majority of American millionaires got there through plain old hard work. Many from starting their own business. In two wage families (like ours) it is even easier as one can earn a wage to live on and the other can spend the time to build a business.

    A big part of this is also thinking in generational terms. Not ‘how do I make a million’, but ‘how do I sow the seeds for my children to have the tools for them to make a million’. Sure, there are always going to be those who ‘get lucky’ in choosing their parents, talent or winning the lottery. But the vast majority of millionaires got there because of their own hard work. Some had a leg up in having parents that valued education as a key to getting ahead, but a lot just came to their own internal decision that they would make the most of the opportunities they had rather than rail against the opportunities they didn’t have.

    God has blessed me and my family. But a big part of that blessing was his helping and not me sitting back and waiting for someone else to do for me.

  4. Bithead says:

    Or, say, Katie Couric

    Yeah.
    What is it she does, again?

  5. Triumph says:

    Then again, if you can’t afford to buy health insurance, it might be advisable — from a strictly financial standpoint — not to have children. Indeed, most people who become wealthy tend to postpone marriage and family considerably longer than their non-wealthy counterparts.

    I concur. Especially after seeing Mike Judge’s latest–and under-appreciated–film, “Idiocracy.” It is a great satire on the consequences of the poor and stupid breeding!

  6. Tlaloc says:

    Sure. Then again, if you can’t afford to buy health insurance, it might be advisable — from a strictly financial standpoint — not to have children.

    At the same time maybe you could afford health insurance or your job provided health insurance but with stagnating wages or even the loss of your job you no longer can. It’s hard to responsibly plan when there are so many looking to pull the rug out from under you.

  7. Do you notice a theme starting up. For the liberals a poor financial situation is because of some unassailable outside force. Common sense ideas such as not doing something that you aren’t financially ready for (e.g. getting married and having kids) is to be mocked. And if this is your view of the world, then it makes sense to want to advocate a big brother government to take care of you. The fact that being a welfare slave to that big government is going to be a lot worse than the current situation doesn’t even cross their minds.

    For the conservatives, the idea is to make the most of what you have. You have responsibility for your own actions and for the choices you make. And of course it makes perfect sense when you believe that to fight against a big government nanny who will coddle you with the result that your options are limited and the opportunities are smothered in red tape.

  8. Bandit says:

    YAJ –

    shorter version – liberal theme – The world owes you a living.

  9. M1EK says:

    YAJ,

    Shut up.

    James,

    Ignoring the friction the health issue brings to bear on the efficiency of our market is dumb, whether you think it ought to be fixed or not. For instance, I quit my last job because of a health benefits change – a job I loved, was quite good at, and which provided greater economic benefit (I think) to the private sector overall. Now I work for the governmnent, one level removed.

    And I’m a software developer. If it affects decisions like this even at my income level, it’s just plumb foolish to act as if it isn’t screwing much more with the decisions middle-income folks need to make.

  10. JKB says:

    At the same time maybe you could afford health insurance or your job provided health insurance but with stagnating wages or even the loss of your job you no longer can. It’s hard to responsibly plan when there are so many looking to pull the rug out from under you.

    Give me a break. Life is hard but your telling me that you can’t survive as well as a woman with a 5th grade education. I was orphaned at a young age. My grandmother took we three kids and raised us. We were poor but I didn’t know it. We had food. We had hospitalization and surgical insurance. Doctors visits and the all to routine stitches came out of the budget. She was poor when she took us and born poorer than any of us can imagine but had pulled herself out of the Great Depression (she was 19 when the crash occurred) to own her own home by the time I was a teenager. The only “government” help we got was social security, survivors benefits and her retirement. You can get this for your kids as well, all you have to do is orphan them. And yet at her death in the mid-nineties, she had about $10k in assets even after a long period of healthcare needs prior to her death.

    How did she do it? We had what we needed but only some of what we wanted. And she saved what she could for dealing with the “so many looking to pull the rug out from under” her. Take some personal responsibility for your future and save to create options and when the worse happens, deal with it and start saving again.

  11. James Joyner says:

    Ignoring the friction the health issue brings to bear on the efficiency of our market is dumb

    Who’s doing that?

    Lots of people make financial decisions taking into account the risks. If you can’t afford to buy health insurance without an employer’s assistance, that’ll naturally influence what job you take.

    At the same time, plenty of people are in the same boat and manage to save money and move up the economic ladder.

  12. Bandit says:

    YAJ,

    Shut up.

    There’s some deep analytical thought

    And I’m a software developer. If it affects decisions like this even at my income level, it’s just plumb foolish to act as if it isn’t screwing much more with the decisions middle-income folks need to make.

    Developers aren’t middle income somewhere? I’ve got to move there.

  13. Dave Schuler says:

    “Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”

    Charles Dickens, David Copperfield

  14. Caliban Darklock says:

    Depends on the developer, Bandit. I used to be a software developer at $18K a year. Now the digits are reversed.

    I think Klein misses the point. The purpose of the article is not to say “you aren’t a millionaire because you suck too much to do these simple things”, but to say “you could be a millionaire if you just did these simple things”.

    The difference is largely a case of reason 3: bad habits. When someone says “you are not happy because of this natural and normal reason”, and your habit is not to fix it, but to become indignant about the accusation – this is not productive. You can yell all you want, and it will not make the statement any less true or get you any closer to being happy. It would be better to stop and think about your habits, identify which if any are bad, and determine how they can be productively changed.

    Just like I always say “poor people are poor for a reason”. The purpose of that is not to say “poor people deserve to be poor”, but that if you don’t address the reason, they will just end up poor again. You can yell all you want about that statement and how unfair that is, but it won’t make it any less true, and it sure as hell won’t bring anybody out of poverty.

  15. C.Wagener says:

    I think a huge factor in wealth is simply who truly wants to become wealthy. Not in the fantasy way, but more in an obsessive way. The points made in the article are valid and will improve your finances, but won’t make you wealthy until late in life.

    It’s pretty easy to have a comfortable life in the U.S., simply by working (moderately) hard. For wealth, you must take risk and most people choose not to.

  16. >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

    Of course, if you become a millionaire only by denying yourself every possible pleasure, what exactly is the point? Saving a big pile of money simply to have a big pile of money while making yourself miserable in the process isn’t exactly healthy either.

  17. Tlaloc says:

    We were poor but I didn’t know it. We had food. We had hospitalization and surgical insurance.

    Riiiiiiight. Reread these three sentences and then look up the definition of poor and get back to me.

    Take some personal responsibility for your future and save to create options and when the worse happens, deal with it and start saving again.

    Uh huh. I’m supposed to take personal responsibility for flat wages and inflation driving up prices? How exactly? Do I run the Fed? Nope. Do I personally allow company executives to drain so much cash from the company coffers that despite making over a billion dollars of profit a quarter most of our employees will be getting raises that don’t meet inflation?

    Grow up. Presonal responsibility is a good thing when talking about issue you actually have control over. When discussing issues outside your control it’s merely a distraction used by those who enable the obscenely rich to be ever more obscene.

  18. DR says:

    Sure. Then again, if you can’t afford to buy health insurance, it might be advisable — from a strictly financial standpoint — not to have children

    And yet today’s conservatives do everything possible to make sure abortion is inaccessable.

  19. James Joyner says:

    Saving a big pile of money simply to have a big pile of money while making yourself miserable in the process isn’t exactly healthy either.

    Agreed. And we’re doing just fine financially.

    Still, we would do a lot better in terms of wealth creation by forgoing $400-$500 in eating out — or even just $200 a month in forgoing drinking alcohol while dining out–and putting it into the stock market.

    We both know that, put some money away into investments, and accept the trade-offs. We just don’t snivel about it when others have more money at the end of the day.

  20. Caliban Darklock says:

    > We just don’t snivel about it when others
    > have more money at the end of the day.

    Bingo.

    You have what you have because you’ve done what you’ve done. Unless and until you take responsibility for that and make all the feasible improvements that can be made, blaming other factors is just sour grapes.

    Sure, I had a company that collapsed largely because I had unreliable people who didn’t do their jobs… but I gave them those jobs. I have to take responsibility for putting them in those jobs. It was my decisions and my policies that ultimately left my business overly dependent on the performance of unreliable people. Next time around, I should make different decisions and have different policies. And if I don’t, it’s nobody’s fault but my own.

  21. M1EK,

    ‘Shut up.’

    Is that your idea of debate. Do you really expect people to be at all persuaded by an argument of such cogency? The subsequent comments bore out the trend I was seeing. If you don’t like the idea that the modern liberal thought has moved so far away from personal responsibility and towards swaddling all in a protective nanny state, then change your side or change sides.

    Besides those who get to skim off the top of the union pension funds, how many millionaires do unions create? How many millionaires does expanded government entitlement programs make? Remember the post started with the question of why people aren’t rich. The conservatives point out the common sense things an individual can do about their financial situation. The liberals just say that it’s big uncontrollable forces that will pull the rug out from under the little guy. One philosophy has a proven track record. The other just turns to more and more government intervention which has a proven track record for not producing wealth (unless you Sen. Feinstein and can steer a few billion of the government money to your husband’s firm).

    I recognize that you are on the wrong side of the debate, but can’t you muster a better argument than ‘shut up’.

  22. TheManTheMyth says:

    Nobody’s Fault But Mine. An underrated Led Zepplin tune (from the album Presence). And true about most of life’s shortcomings as well.

  23. Bandit says:

    I used to be a software developer at $18K a year. Now the digits are reversed.

    And?????????? Where is $81K upper income? It might be above average but it’s cretainly not upper income.

  24. Bandit says:

    Uh huh. I’m supposed to take personal responsibility for flat wages and inflation driving up prices? How exactly?

    Have some ambition maybe? Stop sitting around moping about how things aren’t given to you? Stop whining about how the world owes you a living?

  25. Steph says:

    I bought my own condo at 24 years old.

    How? I wasn’t making big money but I didn’t spend on silly things.

    Okay one advantage I had was living in the Chicago suburbs and had easy public transportation access. I didn’t have to have a car. So I took buses and trains. The occasional cab.

    TV’s pretty much the same whatever you watch it on.

    I didn’t need a whole new wardrobe every other day.

    Didn’t need a cellphone with a plan. YOU DO NOT NEED A CELLPHONE!

    My one indulgence cable tv because of the Cubs.

  26. Steph says:

    One thing I don’t get is how many young people make good money and spend it on lots of fancy clothes and stuff but don’t want the money out of their check for health insurance.

    I handle benefits at my job. So many young people I see with fancy cellphones and clothes and such don’t want the insurance. It’s very reasonable where I work. Even the fanciest schmanciest plan is 67 a month.

    Then they get sick and complain about how much it costs.

    One young man wasn’t going to until he listened to my presentation. Well he signed up for a mid range plan.

    5 months later he got very very sick. Wound up with about a 60 thousand dollar bill. Paid about 500 total out of his pocket.

    He actually wrote me a thank you letter for talking him into it and without using his name use his story as an illustration why to sign up.

  27. Steph says:

    On insurance

    I tell people everyone I know ro sign up for even a basic cover your backside plan with a relatively high deductible. Doesn’t cover strep throat but if you get a major illness or accident can make a huge difference.

  28. Jeff Strain says:

    Whoa, I did a double-take at the beginning of your article there. Good post.

    Jeff Strain (not the same Jeff Strain, and not a millionaire either, though I’m working on it)