Financial Uproar

I’m a pretty lucky guy, even though it doesn’t really translate into getting lucky, if you know what I’m saying. That was a sex joke.

I was born in Canada, which might be the best country in the world, with the exception of the crappy weather most of the country gets. I have great parents, who were kind enough to let me stay in their basement even after I turned 18. My Dad was, without a doubt, the biggest financial influence in my life. He taught me the wonders of compound interest, ways to use leverage to enhance returns, and the importance of living frugally, which should pretty much be a no-brainer at this point.

Because of a great support system and an education unlike most other kids got, I quickly took a shine to financial matters. While other 18 year olds were concerned with getting drunk and hooking up with strangers, I studied balance sheets and read every personal finance book I could get my hands on. I remember intentionally avoiding going out with my friends to stay home and watch the business channel on TV. I’m clearly a bummer at parties.

I’m the first to admit that, statistically speaking, I was set up to accumulate wealth.

Let’s compare my story to my sister. Without going into too many details, she is, shall we say, not as skilled at the art of wealth accumulation as I am. We are at two very different points in the financial spectrum. Why am I so good at accumulating wealth, while someone who had the exact same upbringing so bad at it?

This brings me to a post from Andrea over at So Over Debt, all about how being poor is more complicated than most of us think. For those of you who don’t know how to use a mouse well enough to click through, let me summarize. Poverty is complicated, most people who end up poor do so because of all sorts of factors. A series of bad choices, combined with a poor upbringing or whatever, and we end up with someone who’s poor. I’m painting in broad strokes here, since I kinda have to in just a one paragraph summary. Go check out the post for the whole story.

Since I’m at least 94% sure that post was directed at least in part towards me, let’s take off the gloves. It’s scrappin’ time! Hopefully Andrea doesn’t kick me in the balls or something if we ever meet. Because I wouldn’t put it past her.

Around here, I talk a lot about ways to accumulate wealth. I think that it’s really not that hard. All you need to do is spend less than what you make, do it consistently, and the results start to add up. If you can increase your savings rate by earning more, the results get accelerated even more. There are all sorts of examples of people from every economic background, from every sociological background, and from all sorts of broken homes that manage to accumulate wealth. Why is that?

I’m not sure what the answer is, but Andrea thinks she does. And she thinks it’s luck.

Frankly, the notion that luck plays anything but a small factor in my journey to become wealthy is an insult to all the hours of study I’ve put into the subject, all the hours I’ve spent researching potential investments, and all the hours I’ve busted my hump working hard, physical jobs in order to make excess cash to invest. Sure, I was lucky to win the ovarian lottery, but that’s where the luck ended. Everything else I’ve accomplished it’s because I’ve worked for it.

There are millions of people who are just like me. They were born in a first world country, to parents who raised them to the best of their ability. They had teachers who encouraged and challenged them. They are intelligent enough to go off and finish high school, and a large percentage of them ended up going to college as well. I’m hardly alone in getting these advantages.

And yet, a small percentage of us privileged folks are accumulating serious wealth, while the rest wallow in debt brought on by bad decisions. Some of us are buying stocks and real estate and other assets, while the vast majority buy crap that goes down in value every time they touch it. Some of us make every single major live decision with one goal in mind – how will it help me get rich? After spending the past 10 years working single-handedly towards one goal, it makes me upset that someone can just write off my efforts by declaring that the only reason I’ve been able to accomplish what I have is because I haven’t had any setbacks.

There’s a significant minority of the population that, for whatever reason, simply cannot get wealthy. They’re the types of people who are lucky to even stay gainfully employed. It may be cold up here in Canada, but we have a support system that ensures their basic needs will always be provided. I’m happy to exchange a slightly higher tax rate in exchange for that safety net, just in case I ever need it. We can’t simply flip a switch and make these people into middle class citizens with good jobs. But, at least from my perspective, I’ve never written a word that was intended for people in that situation. Those people don’t need a personal finance blog, they need someone to teach them the basic math skills needed to make a budget in the first place. To compare someone in that type of situation to a college educated person isn’t helpful.

Millions of people are smart, educated, and ambitious enough to put themselves in a position where, with years of hard work, they can begin to become financially independent. And yet, most don’t bother. It’s difficult to dedicate your spare time to learn how an investment really works. It’s hard to take your excess capital and invest it for the future when a MacBook Pro looks all shiny and pretty. The richest among us weren’t alone in being lucky enough to be put into a position to succeed, yet they are alone in succeeding. Why do they rise to the top, while everyone else suffers through mediocrity? Nobody can tell you the exact answer, because every situation is different. What I can tell you is that, while luck plays a factor, it’s not at the top of the list.

Hey, welcome fellow finance nerd. Obviously you take more than a passing interest in your finances, since you show up here (hopefully on a regular basis) to read about some financially related topic. As you all already know, around here I like to focus on the increasing revenue side of the equation, rather than the reducing expenses side. This is because: a) it’s way more fun and b) increasing income is essentially limitless, while decreasing expenses has a limit. But I’ve spent enough time on that, so let’s move on.

There are literally thousands of PF blogs out there. For the purpose of our discussion, I’m going to divide them into two categories. The first, which includes this blog, are written by people who have their financial house in order, and are trying to pass their wisdom onto others who might not be as financially advanced, but who are heading in the right direction. Most of the blogs I read are written by people in the same financial boat. JT McGee clearly knows his way around a balance. sheet. Andrew Hallam became a millionaire on a teacher’s salary. And I’m pretty sure the folks from Control Your Cash have their swimming pool filled up with gold coins, like Scrooge McDuck. No word on whether they skinny dip in it.

Meanwhile, we have the other group of financial blogs. They are written by people who have somewhat limited financial knowledge. They struggle with budgeting and debt repayment. Usually, these people have dug themselves into some sort of financial hole, saw the light, and are now on their way towards becoming debt free. Sometimes, like Fabulously Broke, they pay off their debt and graduate to some more advanced financial thinking. She’s on her way to becoming quite wealthy. Too bad she’s quite not single.

I don’t want to rag on anybody who’s just starting on their financial journey. Everybody has to start somewhere. I was lucky enough to have someone explain to me the wonders of compound interest when I was young enough to really take advantage about it. I was always good at saving money, so I never started out in any sort of financial hole. I was smart enough to start investing almost immediately after I turned 18. I’ve never known any sort of financial hardship. Money has always sort of been my thing.

Meanwhile, others struggle at it. We all can’t be good at everything. So while I was saving and investing, other people were going on shopping sprees and holidays, all funded by credit. They were taking out student loans or whatever. And, as we all know, eventually it all will catch up to you. At some point, you’ll reach rock bottom, and the debt will become a burden you just can’t control anymore.

So they start a personal finance blog.

And hey, that’s great. I can see the thought process behind it. These days, people take to Google to search for the solution of all their problems, from strange rashes to weird porn fetishes. So they Google ‘debt repayment’ and are taken to someone’s blog, which chronicles their journey out of debt. Emboldened by others’ success, they start their own blog, to keep themselves accountable on their path to a positive net worth.

And then, one of two things happen. Either they make significant progress, or they don’t. And, at least from this observer’s viewpoint, more and more aren’t really accomplishing much. These bloggers will have a good month or two, and then something will happen. Sometimes, this is a legitimate emergency. Other times, it’s just consumerism rearing its ugly head. The blogger needs a new laptop, since the one they have is getting slow. They’re serious about fitness now, so they shell out $100 a week on a gym membership and a personal trainer. And, of course, they can never buy the cheapest thing on the market, since it’s always crap. (Financial Uproar: proudly typed on the cheapest laptop I could find back in 2009)

Considering these people think about their finances often enough to HAVE A BLOG ABOUT THE SUBJECT, why doesn’t everybody with a finance blog do well financially? For every blogger that increases their net worth each and every month, we have another who just can’t climb out of debt. At the risk of sounding somewhat condescending, (editor’s note: too late) personal finance isn’t that complicated. Spend less than you make. If you can’t do it, either find a way to earn more or spend less.

We’re generally drawn to people who we consider our peers. This is why I usually don’t read blogs written by people drowning in debt. People who are in the same boat tend to read each other’s stuff. So when their peer makes a financial mistake, they aren’t very hard on them. After all, they’re struggling with many of the same types of issues.

The problem with grouping all types of blogs together is there’s always exceptions to the rule. For every PF blogger who makes consistent financial mistakes, there’s one that is making significant debt progress. For every blogger who struggles to make ends meet, but refuses to go out and earn extra income, there’s somebody else hustling their ass off. So please, if you’re a reader who struggles with the basics, don’t take this personally.

Instead, ask yourself if you’re really taking the steps you need to improve your finances. Are you maximizing your earnings? Are you working as much as you can? Are you minimizing your spending, or are you buying all sorts of unnecessary crap? Are you serious about becoming wealthy? Or are you not willing to put in the work needed to get there?

If the answer to any (or all) of those questions is no then please don’t whine about your financial state. Wealth is everywhere. You just have to put in the work to get it. Life has a way of rewarding the people who put in the most work.