Monday, October 31, 2016, AM | Leave Comment
Many low-income Americans grew up in a culture that taught them that the deck is stacked against them.
And in many ways, that is true. Still, we have countless examples of individuals who managed to break the poverty cycle and rise to meteoric success. Significant research has been done on the attitudes and behaviors of these individuals and how their success stories can be replicated.
I want to distill some of those principles:
Debt is NOT a Tool
Our culture has created the idea that Americans must borrow money in order to have a chance at increased social status.
The price for this borrowed money is legally-enforced payments for years or even decades. The math behind these payments is almost too depressing to go into, and the lower the income level of the borrower, the more devastating debt’s effect on their investing potential.
Money that is sent to the bank or title loan company or credit card is money that cannot be used to build wealth and get ahead. Debt should not be viewed as a necessary evil but as an insidious enemy to be avoided at almost any cost.
Crime Does NOT Pay (in the long run)
Neither does the lottery or any form of gambling. Many people living in poor neighborhoods see the apparent financial success of drug dealers and scam artists and begin to believe that these are the paths that lead to economic freedom.
However, the high rate of incarceration and low life expectancy for street criminals clearly shows that these avenues do not lead to long-term prosperity.
Vice Drains Your Income
Believe it or not, your income level is probably not the biggest contributor to life-long poverty.
America’s poor actually spend more of their disposable income on entertainment, fast-food, alcohol, cigarettes, and drugs than any other income category. These expenses are effectively going into the hands of the grocery store, gas station, liquor store, movie theater and drug dealer than they are into your bank account or investment accounts where they can begin doing you some good.
Dave Ramsey puts it this way: “Your checking account is a freaking sive! Money leaks out of it like you’re sending it to congress or something. You make more than your parents made. You make more than a lot of your friends make, and you make more than you would in any other country in the world! And you’re freaking broke.
Let’s establish that you can find $100, Latte-Breath. Let’s establish that you can find $100, Mr. and Mrs. Cable. $100 invested every month from age 25 to age 65 in a good growth stock mutual fund Roth IRA is $1,176,000. You can do this!”
Status Symbols Are Not Wealth
In most cases, people living in upscale neighborhoods driving expensive cars are not very wealthy. Their incomes may be relatively high, but the extravagant lifestyle they are living is actually a farce built on devastating levels of debt. This lifestyle may appear attractive, but it is not sustainable, and will eventually lead to financial ruin.
Thomas J. Stanley, author of The Millionaire Next Door says “Wealth is not what you make; it’s what you accumulate.”
In other words, to accumulate a high net worth and achieve financial health and independence, the secret is to live below your means, avoid debt, and save and invest every penny that you can.
By this philosophy, you will sacrifice some lifestyle now in order to enjoy financial freedom later.
Whatever your current income level or economic situation, the “secrets” to getting ahead are the same. They all require persistent hard-work and intentional decision-making over a long period of time.
Whatever systemic disadvantages you face or barriers to your success, you can improve your situation and finish in a better position than you began.
Rachael Murphey is an entrepreneur and writer on business, finance, and politics. She has written for N.J. Preovolos, a Criminal Defence Lawyer Metro Vancouver, as well as HostReview.com and Small Biz Club. She currently resides in Denver, CO.Facebook.com/doable.finance
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