Saturday, February 17, 2007

Why Aren't We All Wealthy (Yet) ?


There have been some discussions in the blogosphere on whether Personal Finance bloggers are really knowledgeable or not. After all if we are so smart, why aren't we all wealthy? I think that is a very good question. I submit that many bloggers are knowledgeable. Here are four reasons that I think we are not all wealthy yet:

More Time Needed - Time is one of the major factors in creating wealth. Saving and investing over a long period of time always works. Some people just haven't had the time they need for their plans to work. They are in the 20s and 30s. However, if they continue with their plans they will become wealthy. Many of the PF bloggers I read are in this category. I wish them good fortune on their personal finance journey to success. Remember, for most of us, wealth building is a marathon, not a sprint.

Lack Discipline/Commitment - Many people understand what needs to be done. However, only some are willing to , able to or committed to do it. For example, an activity that is guaranteed to work is to save 10% of one's income. It is guaranteed to work, whether one makes $10,000 or $100,000 per year. Saving only $1 per day can create over $500,000 in 50 years at a 10% return (average yearly return of the stock market since 1926). Imagine what saving 10% of one's income can do.

However, there are many reasons people give for not being able to save 10% of one's income. The reasons include:
  • Would require too much sacrifice.

  • Can't afford 10% after all "necessary" expenses.

  • Too much debt.

  • Don't make enough money.

  • We really "need" to drive a new car or live in a more expensive house.

  • Can't get a higher paying job.
  • Yes and ..... I submit it's a choice. Decide yes, and one will likely become wealthy. Give in to the "reasons", and one may never become wealthy.

    Need a Better Strategy - Having a good plan to build wealth is important. Good plans have a higher probability of success than poor plans. As example of a good plan is to pay oneself first. In my opinion, a poor plan is one a former colleague used - increase one's standard of living by maxing out credit cards, and then make the minimum payment forever. The majority of plans and tactics shared are good ones. However, it is important to know that some plans won't work.

    Here is my own personal wealth building strategy which I believe is a good one:-).

    Had a Disastrous Event - Even the best plans can be derailed by outside influences. Job loss and health issues can be major negative impacts to wealth building. Even a temporary job loss or temporary illness can significantly reduce one's wealth. I know some people have had this happen to them. Getting back on track is generally a difficult and long task.

    We have been fortunate so far and have avoided any disastrous events. While I can't prevent a disastrous event, I make contingency plans in case such an event happens. My contingency plans include an emergency fund of a year's income and comprehensive insurance coverage.


    That's my personal assessment of why we're not all wealthy yet. In my opinion, many of the "more time" group will likely succeed and become wealthy someday. Most of other three groups will try valiantly ... and will likely fail:-(

    For more on Reflections and Musings , check back every Saturday for a new segment.

    Photo Credit: morgueFile.com, Jane M. Sawyer


    This is not financial or wealth buildingadvice. Please consult a professional advisor.

    Copyright © 2007 Achievement Catalyst, LLC

    6 comments:

    Clever Dude said...

    I am cautious about how much ALLLL the pf bloggers out there. There's some sites that I'm very confident about reading, but others are just repeating things they see or not doing any research before they post the "advice".

    Yes, I am about $80k in debt (non-home), but I have a positive net worth. I have a plan to get out of debt and I do my research on saving, earning and spending money before I post on it.

    Personally, I'd rather learn from someone who has gone through the problems of debt and succeeded than to read someone who's never had the problem (until I don't have any debt either!)

    Super Saver said...

    Clever Dude,

    I agree it's best to learn from some who has done it before successfully.

    By the way, I like your new updated site. And good luck on your personal finance journey.

    MossySF said...

    There's really no big secret. At one time, I had about 35K in credit card debt (although in the positive networth with 20K+30K in IRA+taxable investments). Getting rid of the ugly CC debt was just a matter of deciding one day that I would stop buying crap and I wouldn't give a damn about the opinions of others anymore. Luckily I cleared out my CC liabilities so I could resume my investment contributions before the market started the dotbomb rebound

    Super Saver said...

    Mossysf,

    Thanks for your comment and sharing a personal example of how "making a commitment" really makes a difference.

    MoneyMan said...

    Speaking as a PF blogger myself, and having read many blogs, I have to say that 98% of them are completely worthless, and all they do is link to stories in smartmoney, bankrate.com, and other such sites, steal their content (top 10 ways to get out of debt etc...), and comment on it, trying to say it is their own original work.

    Also, if someone let $35k of credit card debt pile up, why would I ever want to hear their advice? I'd rather listen to someone who never had that problem to begin with.

    Super Saver said...

    Money Man,

    Thanks for your comment. I agree with you on content. I also prefer reading blogs with original content and insightful experiences that have helped build wealth. I usually find that I will get some good tips when I read these blogs.