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October 04, 2011


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I am not sure on the self employed front. Not everyone is self employable.

It seems like marriage can either make or break you. I know so many people that married spenders/drinkers/etc and it totally drained their savings, or eliminated their change to save in the first place. I think marrying the right person is absolutely huge. Not just right for you, but right-minded when it comes to being fiscally responsible. You are also right about divorce. I know several people that feel they will have to work forever because they lost so much in a divorce.

With 70% of Americans over 25 WITHOUT college degrees, just getting one is huge.

1) Marriage CAN be great for your financial health if you are both right for each other. If not, and it ends in divorce it can be a financial disaster.

2) While buying a home can be a wealth builder there is much more to it than money. I can't possibly imagine not living in my own home with all of its memories and our beautiful garden.

3) College education worked for me but there are some notable people that do not have college degrees. Two that come to mind are Bill Gates and Steve Jobs. There is also a large segment of the population that really don't have what it takes to get a college education in a really good field. My son is one such example, he is bright but lacked motivation at school, however he has great people skills and has parlayed that into a great career in Sales.

4) Self employment is not something I ever considered, it's just not in my genes to want to be my own boss.

5) Saving hard and always living within your means is a given and if you marry someone that feels the same way it is a recipe for success.

I'd add "where you live" to this list, as in what city/state etc.

You can be the right house—meaning well within your budget, or with cash—but if everything else around you is very expensive, that could be detrimental to your finances. Also, if you live in an area with only one major industry (say Detroit and autos) or very few career options, a job loss will have a much bigger impact on you than if you lived somewhere else.

*buy, not be the right house, though being your own house could be a big money saver.

"paying yourself first from every check you get"

I have a strong loathing for this statement that Money made so I am about to get on my soapbox about it.

[climb on soap box]

It gets used a lot like its some kind of panacea for wealth accumulation or savings, but the statement by itself is both meaningless and potentially wealth destroying.

I will explain why I feel this way.

First of all there is no such thing as paying yourself. You have no ability to pay yourself. Other people pay you, but you cannot. Your money is all your money.

Second of all, this gets used by many people as a kind of accounting ledger trick. They "pay themselves first", lets say 10% of their check. That goes over here in account X, which could be a savings account, a brokerage account, an IRA, whatever. They can look at that and say look at my savings, or my nest egg or my retirement fund. And that's what they think savings is. That is only half the picture and they think that a positive balance on that side of the ledger is more important than the net balance of the entire ledger. In fact this positive balance can often be used as an excuse to not be too worried about expenses because after all they have this nicely growing savings over on one side of the ledger. This lets them not worry about the fact that they are continuing to run up balances on the credit cards at 18% interest, they have brand new cars with big car payments, they have furniture bought on time, a boat bought on time, too big of a house with a big mortgage, etc, etc, etc.

When you add up the Net Worth they are either at close to zero or negative and due to high interest payments on an ever mounting pile of debt they are quickly going in the wrong direction. Kind of reminds you of a certain North American country.

But they are doing fine because they paid themselves first and after all if they need cash, they got a whole pile of it sitting over here in this "pay myself first fund".

That is why I have strong hatred for this phrase and concept.

The key is to spend less than you make and considerably less at that. If you do this by "paying yourself first" by putting a certain amount of money into an account and then being certain you don't spend anymore than what is left after doing that then that is great. However the phrase "pay yourself first" doesn't say that by itself and many people don't get that it is not about "paying yourself first" it is about spending far less than you earn.

Spending less than you earn sounds painful (cause it can be) because you have to make choices and trade-offs and potentially sacrifice. But paying yourself first? Well that's easy. No choices, no trade-offs, no sacrifice. Just make sure I take the first bite of the apple. And if there is not enough apple left to go around, no problem because I paid myself first so all is good.

Growing wealth is simple but it is not easy. "pay yourself first" makes it sound easy and that is a cruel trick.

[step down from soapbox]

I feel like a broken record. With that college degree: WHAT college degree you get is everything. Just having one doesn't matter at all. I can name a dozen names of people with college degrees (including myself) who are currently living under the poverty level, and have been for years, because their degrees are in worthless areas, like Art or English or something obscure.

It's so important to get that college in something that will translate into an actual high-paying job. Degrees based in math or science are everything. That is what will determine whether you live rich or poor (disregarding the other factors you listed, such as marriage).


I never thought of it like this, however, you are sooo right. I have been one of those people that "pays myself first" from each check. However, before reading this, I had just looked at my ENTIRE ledger and realized I actually have a negative balance even with my savings. So what did I do? I took out a chunk of my savings and paid off debt and stopped my "pay yourself first" from each check and decided to put that 10% toward my debt reduction while still saving a very small portion of my income. Once I have comfortably downsized that debt, I will go back to "pay yourself first."


I couldn't agree with you more and have said this time and time again to no avail. No one is listening. People don't realize that college is a business as well. You have to get a degree in something that will translate into a job/career when you graduate. Otherwise, it's a waste to me (in terms of earning potential and income). Very well said. I know truck drivers, secretaries, hair stylists, etc. that make MORE than college educated people. Such a waste of money IMHO depending upon the course of study.

I bet that almost all rich people do 2 & 5. I don't know how you get rich without saving money. For 1,3,4 I am guessing most millionaires do at least 2 if not all 3.

The article goes into detail and covers how each of the 5 things could backfire or be negative. For example it point out that a marriage that ends in divorce is not helpful. At one point they say "Entrepreneurship, like marriage or homeownership, isn't for everyone". So its definitely not a "do these 5 things and you'll be rich" list.

I second BD and Elizabeth's comments about your college degree major and/or minor. This is especially true if you go to an expensive college/university and receive a degree that does not translate to a rewarding career. Your student loans will be an albatross for many years. There are, however, many state schools that are a very good value for the money (such as my alma mater Virginia Tech).


Good for you for recognizing how that concept had fooled you. When you go back to it make sure the amount you pay yourself is how much you can truly save without accumulating any further debt. 10%, 5%, 2%. Whatever it is. Pay yourself that and then make sure you only spend what is left and no more. It is far better to pay yourself 2% and spend 98% than to pay yourself 20% and spend 110%.

Apex, Interesting take and I think you're undoubtedly right about some people being misled by the 'pay yourself first'. I have some friends who may be doing this. They both have good large 401k withdrawal rates and balances yet they have no cash and debts. I wonder if they think that maxing their 401k to pay themselves first is the total answer to their finances.

@BD. Having a degree in English (as I do) does not necessarily translate to instant poverty. I actually have a great career that my degree helped me get. Granted, I had no debt and went to a state school. But the point remains, liberal arts does not necessarily mean you will starve. It may be more likely, but it's not a sure thing.

One more soap box speach... What your collage degree in matters, yes. Having a plan to use it is far more important. I have a number of friends with enginnering degrees who never took the time to research companies, or learn soft skills, and are now lucky to have a job at burger king. One friend with an english degree did thourgh research on the job market all though collage, built professional conections, and is gainfully employed in advertising. Harverd did a study on this at one point, although I can't find a link, to show that planning is the most important factor for collage graduates.

I think everyone hit on the most important points... except one: The decision of when/how many children to have is an important part of wealth creation. I work in the Latino community... and see FAR TOO MANY kids having kids. 16, 17, 18 years old having babies... and then trying to make their finances work later.

GREAT POST! And the comments are spot-on!!

@brooklyn money: You're right: There are always outliers and exceptions. But you have to take into account the odds of being one of those outliers. Odds are, if you have an English degree, you won't be rich. You might luck out and beat the odds, but it'll be hard, and many people don't "make it". You're one of the lucky ones who have a decent career with decent pay due to your degree (congrats!)

Same as an Art degree. Yes, I know a few friends who have Art Degrees and are making half-way decent money. But I know (literally) dozens more with Art Degrees who are at or near the poverty level, or have been unemployed for years and can't find work in their field (many are currently working retail for minimum wage).


Thanks for the advice. I will certainly do this.

Good List! However, I think more people could be self-employed than you give credit. Personally, I think that mroe people will be self-employed in the coming years b/c that is way American is trending. There are thousands of options to go out on your own today and make a lot more money than a traditional job.

I disagree with BD. JUST because you get an English degree doesn't mean you want/have to be a writer. JUST because you get an art degree doesn't mean you want/have to be an artist. One of the reasons people get liberal arts degrees in those fields is because they want a well-rounded education. I know (literally) dozens of people who graduate from liberal arts schools (with majors such as Bio, Psychology, or Art) who go and work great jobs at Amazon and Microsoft (I'm the northwest.) These people are not the exception.

I'm one to believe in needing a bit of luck to get rich. It's not only individual choices but the timing of your entry into the workforce matters a lot. I cannot imagine starting my career in this day in age. It takes guts, guidance, and luck to make it in life today.

32 years of of my career was spent as an engineer at a very large aerospace corporation. Early on there was a union that attempted to organize all of the engineers and scientists but thankfully when we all voted the attempt was defeated by a huge majority. The reason the attempt failed is that unlike some skilled professions, engineers fully realized that regardless of what degree you have and where you obtained it there is a huge difference between individuals when it comes to making big contributions in the workplace and that there is a definite need for merit pay. There are always a few people that excel and outshine the majority and there are a few that are borderline. I remember one engineer that had a PhD from Stanford that was useless and it wasn't long before he was laid off.

The most valuable engineer in our department came to us with an MS in Physics, he knew little about engineering but with his Physics and Math background and a very high intelligence he picked up everything that he needed very fast. After spending many years in our department and producing the primary structural analysis code we all ended up using he decided to leave and start his own company. The company turned out to be very successful, his very first customer was GM, shortly followed by Ford, Chrysler and many others.

My experience has been that where you obtained your degree is of secondary importance. What is of primary importance is your own basic intelligence, and that is something that you are born with. One of the best computer programmers that I knew worked in the Research Labs at our company, and wrote some great state of the art software used by all of us and yet his two degrees were in Mathematics and Music.

The smartest engineer I ever had the pleasure of working with was so brilliant and intelligent he could teach himself everything you need to know about a brand new discipline in a matter of a few weeks just by buying the relevant text books and working through them on his own. He was so valuable that one day he asked our manager to let him go as an employee and hire him back again at double the salary (minus benefits) as an outside consultant, which they were glad to do, and we were happy not to lose him.


High-earning liberal arts majors are not exceptional *among people you know*. I could say the same. Extrapolating from our social circles to the general population is a selection bias. The data suggest these people are indeed the exception:

I think the undercurent of all these things is social and emotional intelligence. If you have good technical skills, you can skimp a little on these qualities but not too much.

Marriage: It takes social and emotional intelligence to find the right person (as well as BE the right person for someone else). Being in love is never enough. A lot of people start out behind the eight ball on this one because 40% of Americans have kids out of wedlock. We're practically guaranteeing a large and permanent underclass at the rate we're going.

Saving: It takes social and emotional intelligence to do this. You have to have self discipline, etc.

College: This takes a combination of savvy and self discipline. Unfortunately, a lot of young Americans (until recently) were fed pie in the sky nonsense that all you needed was a degree in anything and don't worry about student loans...they will take care of themselves once you get that good paying job (NOT).

Self Employment: I do think more people are capable of being self employed....but I have to admit, I don't think the majority of us are cut out for it.

Home Ownership: I prefer a different measure: Keeping your housing costs to a certain % of your gross income, preferably 20% or less. If you can do that, I don't think it will matter all that much whether you rent or own if you do all the other things.

I would add that your emotions & attitude about money has a lot to do with it too. I've had an accounting & finance biz for 10 years so I've seen this firsthand, both with my clients and myself. The successful people are the ones who always believe there is plenty of money to be had and always believe they'll find a way to make it. The ones that are always complaining they are broke always stay broke, no matter how much or little money they make. So I think it's important to remember that money is very emotional and to keep your emotions in check about it!


You are spot on with your comments!

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