Rich People Who Don’t Know How to Handle Money Can Teach Us a Thing or Two.

Last week, the personal finance site Financial Samurai posted a blog that went viral: ” Collecting $ 500,000 a Year: Why It’s So Hard for High Income People to Get Out of the Rat Race . If the $ 500,000 slips, it’s time for some serious financial literacy.

The report notes that spending a high-income family is almost a necessary part of making big money. As you can imagine, the post received some criticism for this. Of course, wealth comes at a high cost, and I won’t pretend to know their “struggle” (although I hope I will someday). All I can say is one glaring difference between the financial struggles of the rich and the financial struggles of the poor: opportunity . When you make a lot of money, you have the opportunity to cut costs, even if it affects your lifestyle or even your earning potential. When you are earning little, you can only cut back so much! In other words, yes, it sucks taking fewer vacations in a country that doesn’t have much vacation time anymore, but at least you have the opportunity to do it.

However, in a breakdown it does not even amaze me.

What I found most interesting was that even at $ 500,000 a year, the couple in the article seemed to have the same financial problems as someone earning $ 50,000 or less. They are overworked, stressed and unable to figure out how to make ends meet. But let’s be real. For most people, $ 500,000 a year, even with taxes and expenses, will solve a lot of problems. However, if this post teaches us anything, it is that money won’t solve all your financial problems if you don’t learn how to manage them too. Sam addresses this issue in his article: ” Gold handcuffs are incredibly difficult to break ,” he says. This is true, and this is why personal finance is so important.

This is reminiscent of what Amy Dachichn, author of The Complete Tightwad Gazette , said about frugality:

Almost everyone who earns more automatically spends more. For this reason, regardless of income, many families feel that they have just enough to live on. Telling you to make more money instead of saving more is like saying, “Don’t eat less, exercise more.” When I found out that walking a mile burns as many calories as an apple, I wondered how many miles I would have to run to burn calories in a chocolate bar. It was wiser to skip the chocolate bar. Most Americans run to burn chocolate bars. They run out of the house, run to kindergarten, run to work … so they can afford chocolate bars and Nintendo games, McDonald’s and designer sneakers.

Keep in mind, Dacicna’s book was published back in the 90s, when the middle class was still a creature . But she still observes well: Even though they make more money, many people still lag behind because they forget (or never learn) some important monetary lessons. Here are a few things that came to my mind as I read this post:

In other words, it’s not enough just to make more money, you also want to know how to control that money. $ 500,000 a year is a pipe dream for most of us. But when viewed from some realistic perspective, good financial habits can help you optimize the way you use your $ 1,000 bonus . Or a tax refund of $ 600 . Or an increase of $ 3,000 a year.

That’s not half a million, but there are still ways the rest of us can make the most of the small windfall.

More…

Leave a Reply

Your email address will not be published. Required fields are marked *