It isn't hard to be successful
It's just easier to be a failure
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JoeUser Forums
Over the years I've gotten to see first hand how people make decisions that make them financially successful or financial basket cases.
The sad thing is, it's not very hard to be financially successful. It takes no luck. It takes no particular skill. All it requires is a sense of DELAYED GRATIFICATION. A sense that, sadly, most people don't have.
Becoming financially successful is the simple matter of building assets that appreciate in value over time at a greater rate than inflation.
That's it.
And yet most people don't do it. Most people are consumers. They take their earnings and use all of it to consume things -- music, TVs, stereos, cell phones, video games, consoles, dinners out, lunches out, clothes, vacations, etc.
In a recent demographic study, most people defined as "poor" (family of 4, household income less than $30,000) owned at least 1 cell phone, owned a car, had a DVD player, had at least 2 televisions, had one computer game console (the study was a couple years ago so it doesn't say what console they had). And near majorities had a computer, had an Internet connection.
In other words, the poor are generally consumers. What they make they spend on consumables.
I see it all the time first hand. People who make relatively little still manage to have new cell phones, iPods, nice clothes, a console, a better car than they really can afford, etc.
Companies can offer 401K plans, even with matching funding, and still most people won't make use of it. They can't, they say, because they have debts. But if one looks closely at those debts, you'll find an expensive hobby or expensive consumption of other kinds going on.
Consider this:
If someone at 25 puts in $2,000 a year into a matching 401K, by the time they hit 55, they will have about $600,000.
Even if the person only puts in $1,000 a year, a trivial amount (less than the average annual raise people get), they'd still have $300,000 or so at 55.
But people won't. Because they have no impulse control. No delayed gratification. They want stuff now...
..and many of them will bemoan the minority of people who do actually build assets and end up letting compounding interest make them financially successful.
One last thought to consider:
You have two young men, both are 25 years old and make say $45,000 a year. Not a bad amount of money.
Person A blows it all on going out to eat every night, having the latest greatest gadgets, etc.
Person B spends pretty good too but eats out a bit less, replaces his cell phone and computer once every other year, etc. And instead puts in $3,000 into a matching 401K.
Time passes. Person A is 55 years old and has nothing to show for his consumption. Person B has $900,000 in the bank! At 65, if he continues forward, he has $2.2 MILLION.
I try to hammer this home to as many people as possible. Most people know they should be doing this but they don't.
That's why I ultimately say "oh boo hoo" when I hear people complain that there's a "shrinking" middle class. The answer is, yea, you have some people who invest (a small %) and most people who consume. And there's your single biggest difference.
and tend to have fewer children. People with a lack of understanding tend to be baby-making factories regardless of their economic situation, which tends to only compound the problem!! 