Personal Finance Friday - It's All Luck!
Ya...no. Sorry, it isn't. I think I a lot of people like to think that it is all about luck because it gives them a great excuse, it also lets other people deflect their success so they don't have to make others feel bad.
Luck plays a role... it does. But here is the thing people don't think about, you don't get one chance at luck. If you flip a coin once, and get $1,000,000 on heads or go to jail on tails, then people's popular perceptions would be right. But that's not how life works, each day you make hundred's of choices. Each one of those is a little flip of the coin, each one of those choices changes the likely outcome of the coin flip the next time, if you make more good choices than bad choices, then the more likely that flip of the coin will land in your favor.
Bad choices and bad luck can and do compound on each other, while good choices and good luck compound the other way.
You want a few examples? Okay, here we go...
PERSON A decides in high school, to have fun at a party instead of study for that test. Maybe they do this repeatedly. What if he or she doesn't do as well as they could in classes, and in turn doesn't get into the college they wanted to. They might end up deciding to go to a college that isn't the greatest. Let's say they also choose a subject that isn't in high demand in the marketplace (French History Major :).) They struggle to get a good job. When they do find a job they still like to go party with their friends, but hey, "Life is hard, you should have fun while you can!" This person doesn't have great insurance or maybe no insurance depending on their job... now life smacks them hard with cancer. Expenses destroy what little finances they had. Bad luck! Life is stacked against people you know! They survive their fight with cancer, but they cruise into retirement with no savings, and not many prospects for a better life. Man life is terrible!
PERSON B decides, "Man I want to have fun with my friend,s but shoot I really need to study for these tests" (that choice is made over and over and over.) They get into a pretty good college. They think about what is a job they could probably like and is ALSO needed and in demand in the area they want to live. They graduate college, ohh man the job market has dropped out from under them, bad luck! So they look around and find that people are hiring in another part of the country, so they make the sacrifice and move. They work hard, and continue to add to their skill set. They think about their career and make goals about where they want to end up and over time, move up the ranks. They have a pretty good job, have been saving money, because hey, "You never know what the future holds, better to be prepared." Life smacks them hard, cancer! Well they have good insurance, and have savings, it's a set back but they end up okay. Moving into retirement their savings is growing each year without even having to save that much. They have a legacy to pass to their kids, man life can be tough, but it's also wonderful!
I know I know, "I have a friend, who was born poor, with a learning disability, who got in car accident and was paralyzed and then a rare disease hit them, etc. How are they supposed to get ahead?!!!" I'm not talking about them, I'm talking about the other 95% of people who may have some challenges, but who in the end, if they make consistently good choices could improve their life drastically over several decades.
That all being said you could get really unlucky (like above) or really super lucky. How do you think Billionaires are made. They are likely people who would have been millionaires, who just got super lucky. I'm going to make a controversial statement here, that even my wife was giving me grief for... I think it is well within 95% of the population's means to retire as millionaires. It requires A LOT of hard work, sacrifices, and good choices, but $1 million to $2 million in 40 - 50 years of work even if you earn a lower middle class salary isn't out of the question.
- saving $400 a month, earning 5% a year, in 50 years is $1,000,000
- saving $550 a month, earning 5% a year, in 45 years is $1,000,000
- saving $700 a month, earning 5% a year, in 40 years is $1,000,000
- saving $950 a month, earning 5% a year, in 35 years is $1,000,000
- saving $1250 a month, earning 5% a year, in 30 years is $1,000,000
- saving $1750 a month, earning 5% a year, in 25 years is $1,000,000
I know people love to have excuses for why things aren't the way they want them. Some of them are valid and sad, I'm not talking about those. I'm talking about all the other ones that stand in the way of us getting to be what we want or create what we want, or to be what those around us need us to be. Throw the excuses out, they may make you feel better, but just like a drug they will only hold you down.