We’ve all seen the catchy headlines and probably even shamefully clicked on a few of them (no shame with THIS article though):
“Frugal teacher retires with $2 million in savings”.
“Mailman makes millions in the stock market.”
“Librarian builds net worth that exceeds school president.”
Two of the most popular finance books in history, The Wealthy Barber and The Millionaire Next Door, achieved their popularity for the very same promise implied in their titles: ordinary people like you can defy the odds and become rich – here’s how.
Many of these articles, books, and courses probably aren’t worth the time invested in consuming them. A few might actually be phenomenal and worth their weight in gold.
But whether the advice is good or bad, one thing I am sure of, is that most people who seek out these types of articles or are lured in by the linkbait will not achieve their desired riches, sadly. Relax – if you read this blog and follow my musings, you are exempt for being a loyal supporter and not a linkbait chaser. ;-)
So why won’t these folks achieve mass wealth?
They want the sexy tip that only a few have seen until this very moment. The quick fix. The secret hack. The one true infallible (and easy) solution that will overcome decades of zero net worth gain.
Believe it or not, it does actually exist! You ready??
Spend a lot less than you earn over time.
This shouldn’t come as a big surprise. There’s really only two parts to the wealth equation: spending and earning.
Spending a lot more than you earn = massive debt and bankruptcy filings.
Spending a little more than you earn = high interest consumer debt.
Spending a little less than you earn = the average American (5% personal savings rate).
Spending a lot less than you earn = wealth building.
I know that it’s not sexy and I’m sure you’ve heard it before. Yet, it’s still the one true way. And shortcuts usually leave you burned.
The challenge is in the THOUSANDS of details that really can’t be summarized in one article, one course, or even one massive book. And that is the differentiator, right there. Are you willing to spend the time to work hard, learn, take action, resist temptation, invest wisely, consult others, become an active wealth chaser? Outside of a very rare and lucky few, that is what it takes. It’s what separates a middle class millionaire from a middle class debtor.
Unfortunately, I don’t see the title “How to accumulate wealth from decades of hard work, learning, frugality, consultation, investing, and avoiding temptation” earning too many clicks or copies sold.
I completely agree. Saving isn’t sexy but it’s the way to wealth. Let compound interest do the work!
I’ll buy that book if you write it up ;)
I already practice “Spending a lot less than you earn” but then what do you do w/ the leftover money? Invest it? Save it? I do both, but it could be better.
Completely agree G.E. The hardest (and therefore most important) time to do this is starting out in the workforce. Pay is the lowest; for many, student debt is the highest; and the freedom to do whatever you want (generally spending money) is so new and exhilarating that its easy to get caught in the debt trap. I started reading your blog to figure out how not to get caught in debt and to get out and free as soon as I could.
Thanks for the article.
I’ve read ‘The Millionaire Next Door’ and think that the book espouses the ‘spending a lot less than you earn’ mentality. I really enjoyed reading it too. That’s probably because I do the same things that the ‘ordinary millionaires’ in the book do.
Definitely true. But the tried and true method is long and people want results NOW. Once you have a long term retirement plan (and I mean strategy, not just a 401K), I think wealth is accessible to a lot of people who otherwise wouldn’t consider themselves to have wealth-potential.
You are wise beyond your years my little grasshopper. I was one of those people who thought only the lottery could make me rich, but now I see how wrong I was and now I’m playing catch up.
Anything you put your mind to is easy. What is not easy is doing what you don’t want to do.
Saving to me is easy. It’s a no-brainer because it’s what makes me feel good about my situation.
For some, saving is like torture. It’s all about how our minds work. After all, perception is reality.
The devil (to getting rich in this case) is right in the details. The principles are pretty simple and straightforward (Spending a lot less than you earn = wealth building.)…living upto them though, that’s where most of us fall way short.
Hi GE, great article. It’s hard living within your means when the majority of society goes into horrific debt and then they get upset when they can’t get out. Thanks for sharing.
I agree with your point and like the post, but was drawn into check it out not by the headline but by the blog name. (Saw this post featured on RockStar Finance). I’ve been thinking a lot about how it is one of life’s great ironies that many of the biggest decisions that you make (career, if go to college and how to pay for it, if/who you will marry, philosophy on money, etc.) are often made and patterns are set when you are young and have the least amount of experience and wisdom to make the right decisions. Just curious if you would be willing to share your strategies for reaching out to a young audience and how receptive you’ve found this audience to be.
Yay! I am ordinary! That means I have the opportunity to become rich! At least I have that opportunity, no complaints here. Just building piece by piece, one month at a time!
I’m so glad I read the Millionaire Next Door book while I was still in college. Particularly the part about buying a house for no more than 2.5x your annual salary. We did that, based on only my husband’s salary (we are both engineers but pretended I didn’t work so we could save extra and have an easier adjustment to me being a self-employed SAHM now), and paid off the house in under 3 years with my extra paychecks. Cheers for good advice! :)
Thanks for another straight forward article G.E!!
Can I have you and/or any of the readers answer a burning question I have?
When you write are you “willing to spend the time to work hard, learn, take action, resist temptation, INVEST WISELY…”, usually the personal finance blogs I read talk about maxing out a Roth IRA every year as a wise investment strategy. Already having a traditional pension plan and a 401k plan through my government employer, I went to my local bank (suntrust) and they quoted me that starting a Roth IRA with them would provide me with about a 1.2 percent return annually. This doesn’t sound like a wise investment to me because my 401k is providing me around a 15 percent return annually based on a portfolio I chose of mainly stocks.
What I am not understanding?
Is there investment companies that have Roth IRA’s that give you stock or bond options out there? Is that what all the personal finance experts really mean in setting up a Roth IRA, that you should focus on stocks? Also, could someone give me an example of what their typical return is in a Roth IRA?
Thank you all so much in advance!!
Roth IRA’s are simply an investment account, not an investment. Banks don’t permit stock/bond/equity investing – just CD’s.
Check out this post for more on legit investment brokers you can invest in equities with: https://20somethingfinance.com/discount-online-broker/
Read a book from Jack Bogle before you start investing.
Thanks so much! You and your website have helped make great differences in my financial life!
There’s no hidden secret to it. Besides the people who strike it rich by winning the lottery or starting a huge company, saving a lot more than you earn is the key. Unfortunately the consumer culture we live in currently advocates the opposite. It takes time and effort to get swimming upstream but once you do, you’ll be golden.
Couldn’t agree more! saving, delaying gratification, investing and finding more than 10 ways to make more money is the key to building wealth. Great post. Thanks for sharing.
I don’t understand the fixation with wealth building. Ultimately money will be used for:
2. Creating further wealth
So when you pull back on #1 and focus on #2… what’s the end-game? What does a dragon do with his massive pile of gold? I understanding needing financial security but eventually the word “overkill” comes to mind. Enjoy what you earn… make experiences, give, and be happy.
Great point! Doing the things we should do, financially and otherwise, is never the fun or easy choice, but if we truly want to get to where we say we want to get to, we will make those hard decisions and stick to them. Thanks for sharing! Loved the humor :)
Sorry G.E. I disagree. The secret to becoming wealthy is simply EARNING MORE MONEY. And there is no time but the present to do so.
You should be inspiring people to earn more money, NOT saving through the nose – everyone with half a brain knows saving isn’t sustainable. ESP in this economy.
People who wish to enjoy life to its fullest extent need the full use of things. They need to get rich. Enter Wallace Wattles…
You have a great thing going for you – your brand. Why don’t you inspire people to develop their own?
To each his own, but you’re running counter to the general principles of this blog. For years, GE’s been preaching to save and invest as much of your income as you comfortably can. Not so much that you can’t afford food, but don’t live too large either.
In regards to increasing your salary – I completely agree, but there’s only so much you can do. You can’t magically go up to your boss, demand a $50k/year raise, and expect it to happen. No, your salary isn’t completely out of your control, but it’s not completely *in* your control, either.
In complete agreement. There is no magic formula other than the obvious which we all know. Everyone wants a short cut which seldom exist. Nice post, a little short though….
I heard a phrase the other day that fits into this up nicely: if investing is exciting you’re doing it wrong.