Most People Aren’t Rich

Ads show us opulent lives. The entertainment industry makes it seem like everybody lives in a mansion and spends their time deciding whether to get the new Maybach model or settle for the new Benz. All shopping happens on Rodeo Drive or Fifth Avenue. All restaurants involve reservations. All happiness comes from consumption.

Then, everybody’s given 13 credit cards.

Gosh, I wonder how we ever got into a financial mess?

I wrote yesterday about a forlorn future, and the idea for that article came from a friend of mine who heard futurists discussing scenarios at Saatchi & Saatchi in New York. Longtime reader Zack wrote in that article’s comments section something that made me realize that a lot of what we in the financial community write about doesn’t even apply to most people’s lives:

I’ve been a fan of your books and website for years, and have also subscribed to your letter. I’m a huge fan of your writing because I think you’re dead on about the coming financial meltdown(s). However, it is hard not to get depressed when I’m looking for solutions to become wealthy (or at least financially secure).

You see, I am pretty sure that most of your friends and readers have more money and more experience than I do. I’m 28 yrs old and have done little more than customer service work for credit cards. I am trying to live my life financially UN-stupid. I make less than 30k/yr and am trying to pay for a house and student loans. I would love to invest more, but it’s difficult to scrape together enough so that commissions don’t eat into it.

I would love to get a job making more money, but I am now competing with people five, 10, 20 years older than me with that much more experience to get the job(s) that I am applying for. It is seemingly impossible to convince an employer to hire me when there is someone who has 10 more years experience than me who is applying for the same job and will accept the same pay as me because the job market is so tight.

Maybe it’s better I keep my head down until enough other people trip on what’s in front of them because they’re looking up, and then I can step over and maybe not be as wealthy but at least not be broke.

Something to bear in mind with all financial writing is this: The stock market is not the real economy. Stocks rise when life sucks on Main Street. Stocks fall when everything’s dandy on Main Street. Stocks move for many reasons that have nothing to do with whether the job market is tight, people are happy, war is breaking out, or the president is popular or not. Especially recently, it’s been extremely hard to analyze stocks because they’ve been manipulated by government stimulus that helped banks trade instead of lend.

That’s why stock reporting is such a meaningless sideshow to most people. Zack, you’re not alone. My readers aren’t all rich. Plenty of people who come to this site and others far more famous and more heavily trafficked are looking to buy 10 or 100 shares of their first stock just to feel they have some skin in the American game. Some of the most serious sample stock analysis people email me to double-check their ideas is intended to help them decide where to put their $500. I’m not exaggerating. Most of the world isn’t Bill Clinton or Bill Gates or Bill Gross but, rather, Bill the mechanic down the street who’s wondering how to keep his kids fed now that he can’t get more than 25 hours a week at work.

I hope, Zack, that the economy doesn’t get so bad that you need to wait for somebody above you to stumble and fall before getting ahead. It’s probably going to get pretty bad, though, which is something all of us need to prepare for in advance. Whatever our incomes, we need to slash our spending to be well below them and sock away the difference for rainy years to come.

By the way, most of my rich readers and friends got rich by living within their means in the leaner younger years of their lives, then using the capital they amassed to invest in productive assets that grew that capital so they could invest in more productive assets. They didn’t get rich by flashing their Black Cards around town and giving themselves diamond tennis bracelets at every Sunday brunch. Most of them change their own helicopter oil, too!

Don’t let the consumption culture dupe you. Rein in your expectations. Live within your means. There’s no way to be prouder than that. I would be more impressed with you driving up to my home in a 10-year-old car paid in full than a sparkly new BMW that you leased. Any debt dope can sign into servitude. Only the proud live within their means.

So, keep your chin up, Zack. Smarts always have value. Even in an economy shot to hell by powerful interests who abused it into a bottomless pit of debt, opportunities exist for people who are motivated to build themselves up.

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