If you’re reading this, chances are that you just might have an interest in getting ahead financially. People generally don’t read personal finance blogs if they don’t care about money. Certainly, those run such blogs – like this one – are quite interested!
I’ve been thinking a bit about why it’s so hard for so many people to get ahead, or even to get to a point where they’re comfortable with finances. Personally, I’m working on this every day – diligently working toward being able to retire someday, while concurrently believing in responsibly living in the present as well. Quite the balance, sometimes! Yet, it’s not easy all the time for many folks.
When you think about it, the steps to seem quite basic:
Now, the current economic climate doesn’t make it easy to get work, much less the right work all the time. That being said, if one pursues and achieves obtaining a solid college education – and possibly graduate school – there should be a better chance for employment. It can be said that education and net worth might be correlated, in terms of level of education.
Beyond that, there is often money to be made when people are truly driven and motivated. Maybe not a dream job right away, but money can be earned if one is tenacious and really wants it. I wrote about persistency and wealth before, and think there is something to that concept.
If we make money, then we should simply make sure that we save some of it. As long as we be sure to spend wisely, and discern wants from needs, we should be putting ourselves in position to save. The more we save, the closer we could be to retirement and financial security.
So, at this point, we’ve earned and saved. If we just keep money under the mattress, so to speak, it will lose value relative to inflation. If we keep pace with inflation, our money isn’t working for us. Thus, by understanding the importance of rate of return, we can begin to get our money to work for us. The long-term impact of just a few percentage points of rate of return can be quite impressive!
So why isn’t it automatic that everyone will succeed?
For some people, there can genuinely be bad luck. I know that it might not be a popular notion among some personal finance bloggers, but I don’t think we can fully plan for everything. Sometimes there is an element of randomness that we can’t control. The notion of a crazy driver hitting us, totaling our car and causing injury, is something that can happen to anyone. Being prepared doesn’t matter. Also, we might get unforeseen health issues no matter how hard we try to keep healthy. All of these thing can be luck-related.
Wrong Approach to Education
No matter what statistics come out about the value of an education – along with common sense – there will be people who think it doesn’t matter. As in, “college is overrated”, or “college isn’t for me”, or “I know someone who’s doing great, and he didn’t go to college”. This is fully controllable, as long as we accept reality.
Also, sometimes people who do get a college education, and perhaps a graduate degree, might pursue a path that doesn’t pay off. Spending time on a major that doesn’t yield and marketable skills might not be the best approach. Additionally, choosing a school that is overpriced and causes one to take out excessive student loans can really set a person back financially. In such cases, it’s possible that getting that education might actually cause long-term problems, simply because of the cost.
Someone could work hard, and have all the right intentions regarding saving and investing, but could be saddled with debt that must be paid off. I think a lot of this is letting emotions get in the way of making sound decisions. Sometimes a couple might “stretch” to buy a home they really love – after all, a home is a special place, right? Well, thinking clearly they would view it as a place to live and one that’s a financial liability in terms of mortgage, taxes, utilities, etc.
Beyond that, there are the obvious suspects, such as buying a car that’s too expensive, or simply piling up credit card debt for consumer purchases. Going into debt to buy things we really crave having, or feel entitled to based on a certain standard of living, doesn’t make sense. Yet, I think just one or two big mistakes along these lines could totally derail someone.
This category includes some things that might not always be a person’s fault, but sometimes life happens. People might choose a career path they genuinely hate, but do it anyway. Sometimes folks get divorced, which can wreck finances. Other times, people might do something reckless, such as text and drive or something silly like that which could cause them big problems via accidents. You get the idea – sometimes people might mean well, but simply either make mistakes or have life events happen to them.
Lack of Attention to Health
We’re not talking about unexpected things in this case. Here, we’re talking about health issues that could have been prevented or perhaps minimized, if a person took care of himself. Examples of smart choices along those lines would be maintain a healthy diet, getting exercise, understanding the importance of sleep, and managing stress.
If we aren’t healthy, our ability to make money could be impacted or – in some cases – even curtailed.
Bottom Line – While the steps to wealth can seem straightforward, it often takes more than simply working hard to make money, save it, and invest it. There are many decisions we make along the way with our lives that can either help us or get in the way of our efforts. I suspect that how we handle these other decisions that shape the structure of our lives will influence our ability to reach our financial goals.
My Questions for You
Do you think that it’s actually easier than people think to get ahead? Or, is it more difficult than meets the eye?
What factors do you think help drive financial success?
What factors do you think get in the way of people’s plans?