Note: I recognize that for many or most middle-class families this may
just not be feasible.
Nobody becomes superwealthy through paychecks—it takes equity
in growing assets to create real wealth. Just compare the net worth of
CEOs to the founders of their companies. Cash compensation will
improve your lifestyle, but not your wealth—it isn’t enough, and saving
is counterintuitive and just plain hard. High-income individuals tend
to flock together, and what we see, we covet. It’s surprisingly easy to
get used to business class. The definition of rich is when your passive
income exceeds your nut (what you need to live). My dad, collecting
$45,000 in social security and cash flow from investments, is rich, as
he spends $40,000/year. I have several friends in finance who make
seven figures who are not rich, as the moment they stop working, they
are shit out of luck. The path to rich(es) is a path of living below your
means and investing in income-producing assets. Rich is more a
function of discipline than how much you make.
Human beings, especially Americans, aren’t natural savers. We’re
optimists, and worse, we tend to view our greatest earning years as
normal, and assume any good run of income will last. There are a
disturbing number of service industry professionals, athletes, and
entertainers who made millions in just a few years, but who ended up
broke because they had no forced savings. Sports Illustrated estimated
that 78 percent of all NFL players are either under substantial fiscal
stress or go bankrupt within two years after their career ends.
Serial Monogamy
Familiarity breeds contempt. External hires are paid nearly 20 percent
more than company veterans at the same level, despite receiving lower
performance evaluations and still being more likely to quit. There is, of
course, a balance. If you spend all day shining up your LinkedIn
profile and lunching with headhunters, you’ll be seen as promiscuous
and won’t be attractive to any employer.
The strategy is serial monogamy. Find a good employer where you
can learn new skills, garner senior-level sponsorship (somebody who
will fight for you), get equity/forced savings, and fully dedicate