Many people dream of becoming wealthy, but they don’t think carefully about what that really means. They incorrectly assume that being wealthy means having a large income.
How much money you make is meaningless. It’s how much money you keep that matters.
Rich people make lots of money. Wealthy people save lots of money. Which would you rather be? Okay, that doesn’t need to be either/or. Best of all is to be rich and wealthy. But I’ve met many high-income earners who don’t save, which means they’re poor. And I’ve met many low-income earners who are frugal savers and have significant wealth.
One of my clients is a cafeteria worker in a private school who makes about $40,000 a year. She is married to a man who works in construction and has two children. She immigrated to America as a young woman and is intimately familiar with the pain of poverty.
She no longer wants that life, especially for her children, so she budgets, saves, and invests carefully. At thirty-five years old, she already has a solid six-figure retirement account balance. She will likely reach $1 million in savings on her current trajectory.
My father is a good example of what not to do. As a former CEO and high-income earner extraordinaire, he made a lot of money but didn’t save much of it. With each promotion and pay raise, his lifestyle became increasingly lavish.
He started out in a small efficiency apartment, then traded up to a stylish ranch home, and then to a three-story mansion on fifteen acres at the height of his career. He had a black luxury car for work, a red sportscar for the weekend, and two motorcycles—one black and one red—for random fun.
What happened? He lost it all. Watching him suffer through that transition was heartrending, especially because it didn’t have to be that way.
My role as a financial advisor is a little unique because I work with entire institutions, not just wealthy clients. When working with educational plans, I serve the retirement needs of everyone in the school, from the college president to the maintenance staff.
When first analyzing account balances, I expected the administrators with the biggest salaries to have the most wealth and that the teachers and then maintenance staff should have the least savings. Much to my surprise that isn’t always the case.
A philosophy professor showed me a happy, healthy way to build a small fortune. Laura is a classic “Earth mother.” She drives a beat-up blue truck, grows much of her own food in a vibrant organic garden, and hangs her clothes out to dry to protect the environment. She waltzes across campus in hand-knit hippie dresses and sandals, with a wild mane of frizzy black hair.
When we first met, I expected a financial train wreck. However, after decades of living below her means, taking joy and gratitude in the blessings of each day, and not giving a flying fig about what other people thought, Laura has more money in her retirement account, by far, than any other employee in her school.
The college president has a fancy car, nice suits, and a vacation home, but Laura has two times as much money saved. She is solidly in the seven digits in her retirement account. Yet she only has a five-digit salary. She also raised two fabulous children and sent them to excellent private schools.
You can do the same and become wealthy, but the key is to live below your means and not care about status symbols.
Doug Lynam is a partner at LongView Asset Management in Santa Fe and a former Benedictine monk. He is the author of From Monk to Money Manager: A Former Monk’s Financial Guide to Becoming A Little Bit Wealthy — And Why That’s Okay. Contact him at firstname.lastname@example.org
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