April 21, 2015

Thinking Like the Rich

A while back, while on maternity leave with Nicole, I read an article about how rich people think differently than the rest of us. It wasn’t that exciting of an article, but one point struck a cord with me. It seemed so obvious, and yet knew at the same time.

“Average people focus on saving. Rich people focus on earning.”

On the one hand, it’s sort of a self fulfilling prophecy. Those who can focus on earning, are typically people who earn more to begin with: doctors, Lawyers, self employed business owners. If you can control how much work you take on, you can affect how much you earn. Get another client, take another case, etc. In theory at least. There are always details. When you’re working for someone else, you can only indirectly increase your income. Good performance can help get bonuses and raises, but they’re not guaranteed.

Savings, on the other hand, is bounded by earnings. You cannot save more than you earn. Depending on the ratio of fixed costs to earnings, there may not be much wiggle room to start with.

This idea resonated so strongly with me in part because one of my roles in this family has been bargain hunter. I take great pride in not overspending, but always hunting for a deal could be backfiring. My wedding is a prime example. Domingo and I married in my third year in graduate school. By my estimate I was able to save us about a months salary by doing the extra leg work leading up to the wedding. If I had hired a wedding planner and spent the extra time focusing on my studies instead, I could have graduated sooner. A month earlier would have been a break even point. Two months earlier and I’d come out ahead by handing off the responsibility.

Of course there’s more to life than money. I enjoyed planning my wedding, just as I enjoy bargain hunting. But perhaps it’s not worth too much of my time anymore, especially as time is becoming more and more a fleeting resource.

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