Why Everything We’ve Been Told About Financial Success is Wrong

This article is part of our 12 Keys to Lasting Wealth Series – (Key 1: Avoid Lifestyle Inflation).

We’ve all heard it. Work hard. Study hard. Grow up. Get a good job and live happily ever after.

But there’s a part they forgot to tell us – live below your means, spend less than you make and create lasting wealth with what’s left over. That wealth, in turn, will allow you to live happily ever after.

There’s a problem with the “work hard to get a good job” path to financial success. It assumes a high paying job is the way to financial easy street.

The fact: Most people with the high paying jobs are trapped just like the rest of us, – trapped by a lifestyle they’re struggling to maintain. Sure it’s a lifestyle more lavish than our own, but they’re trapped just the same.

The second problem with the “work hard to get a good job and everything will be alright” myth is that it robs us of power, -the power to fully realize that anyone can create lasting wealth and financial freedom if they have the patience and right frame of mind.

STOP. Let’s be crystal clear. Anyone can build wealth, regardless the size of their salary.

Let me introduce you to Diva Delores and Fiscally Fit Francine.

Diva Delores has a good “gobment” job working as an assistant financial director for a health agency. Earning $92,000 a year, Ms Delores loves to live the part. She drives a brand new Lexus ES 350.

Diva Delores hates cooking so fine dining at D.C.’s culinary establishments is her gig. A fashionista, Ms. Diva is on a first name basis with Emilio Pucci, Louis Vuitton and Jimmy Choo, – or should we say first name basis with the salespeople who sell her these brands. Of course Ms. Diva can’t let her appearance go. Weekly French manicures, pedicures and hair appointments are a must.

Diva Delores hangs around with her free spending partners in crime, Visa Vanessa and Master Card Mary. Expensive martinis and lattes accompany their get-togethers as they gossip and plan their next adventures – exclusive parties, ski trips, and the yearly girlfriend trip to the Bahamas.

Yes, Diva Delores is living the life because she’s earned it, hasn’t she?

Fiscally Fit Francine is a little more practical. At $43,000 a year, she earns less than half as much as our friend Diva Delores. Yet, Francine still manages to have fun. She attends the free shows, festivals, and happy hours in the D.C. area. Her choice in transportation is practical, choosing a three year old Honda Accord over a new upscale sedan.

Francine loves to eat out as well but views it as a treat which she enjoys once or twice a month. Our Fiscally Fit lady brings her lunch to work three times a week, cooks meals at home, and isn’t afraid to try generic grocery items.

She’s avoided the Starbucks latte habit and is just as comfortable at home playing spades or watching movies with friends as she is spending the night on the town. Fiscally Fit Francine always researches major purchases and never forgets to negotiate with the salesperson to get the best deal.

Yes, Francine loves fine fashion as much as the next woman but purchases selectively knowing she doesn’t need a closet full of expensive shoes and handbags to define her.

The result: Diva Delores ends up living paycheck to paycheck, frequently reaching for her credit card to make ends meet. Fiscally Fit Francine, on the other hand, finds herself saving over $495 a month – or nearly $5900 a year.

As a result, Francine has built up an emergency fund and fully funded her 401K, which her company matches – creating an extra $400 a year in free money. In addition, Fiscally Fit Francine has invested money in a Roth IRA and invested in tax free municipal bonds.

In five years Diva Delores will have nothing to show for her high paying job except a closet full of clothes and a 5 year old Lexus. Yet, through investments that earn a respectable 8.5% yearly return, Fiscally Fit Francine will have already saved $35,941. At the end of 10 years she will have saved $89,239. Twenty-five years from now she’ll have saved a whopping $471,091.

Best of all, with smart spending habits, Francine enjoys life without living paycheck to paycheck. No worries or anxieties about credit card bills. She enjoys the freedom of living debt free while her money grows for her.

Are you beginning to see that it’s not how much you make, it’s how much you save that matters. By taking control of lifestyle inflation – the natural tendency to spend everything we make – we have money left over to invest.

Saving and investing just 10% to 15% of your income, as in the case of Fiscally Fit Francine, plants the seed to wealth creation. This seed, over time, grows into a blossoming tree of abundance.

In the next post we’ll see how this concept allowed Oseola McCarty, a washerwoman with a sixth grade education, to accumulate more wealth than a famous NBA basketball player.