2.- Welcome to My Path
Let’s stop here, before we move through this thick wood, and think for a moment. What is it that you are looking for? Where do you want to go?
You say that you want to get rich. And as quickly as possible.
I say you are mistaken. But at this point, at the beginning of our journey, you can’t be expected to know that.
“If not getting rich, then what?” you want to know.
“You want to build wealth,” I say.
“What’s the difference?”
“There is a big difference,” I say. “It’s the difference between wanting and possessing, between anxiety and serenity, between having now and forever lacking.”
“Sounds like a lot of horseshit,” you reply.
“Follow me down this path and you’ll see,” I say with a wink and a smile.
“And why should I let you guide me?”
“It is my path. The one I cut. The one I know.”
Before I found my path
As a boy, I never had any goals or specific ambitions. I wanted only to be different from how I saw myself: weak, lonely, poor, and insignificant.
I dreamed – actually dreamed – of being rich and popular. I had a specific dream repeatedly for years. It took place in the parking lot “schoolyard” where we played during lunch break. All my classmates are there. A white limousine rides by slowly and stops. A chauffer jumps out, prances around the car, and opens the door. Little me, in white tails and brandishing a diamond-tipped walking stick, steps out. My classmates ooh and ah. I am loved.
I was earning money – or having a side hustle as they say now – ever since I could ride a bike.
I had the usual childhood jobs: delivering papers, cleaning neighbors’ kitchens, cutting grass, stocking groceries in the back of Al’s Deli, working in the Rockville Center Carwash, etc.
Before we graduated from high school, my friend Peter and I had a business painting the houses of the rich people that lived on Long Island’s north shore.
To pay for college and graduate school, I generally worked three jobs, including writing essays for my fellow students. (I offered them a guaranteed grade of B or better.)
Through it all, I never had a clear view of what I was doing. I had no money. I needed money. So I did whatever I could to make ends meet. Some weeks I made more money than I needed. When I did, I found a way to spend that money on something that pleased me for a few hours or, if I was smart, a few days.
I was walking but I wasn’t on a path.
I think I found my path in 1983.
The thing about having many goals…
In 1982, I had just been hired as editorial director for a fledgling newsletter publishing company in South Florida. Because I had to give the occasional speech, I enrolled in a Dale Carnegie course on public speaking. Somehow, I ended up in the Carnegie basic success course instead.
How to Win Friends and Influence People is a 14-week program in which you are asked to focus on a certain character-changing task each week and then report on your progress the following week.
I was the worst student in the class. Cynical and suspicious, I despised what I took to be the silly prattle of the teachers. But I’d paid good money to be there, so I grudgingly went along with the program – and I’m very glad I did.
The assignment for week four was to come up with a single goal to pursue for the remaining 10 weeks. The idea was that by concentrating on only one goal, you could make much more progress than you would with a wider scope of objectives.
Sure enough, I had a hell of a time with that assignment.
When I started listing my goals, I could think of only two or three. But as I put more thought into it, the list began to expand. First to half a dozen… then to 10… and then 20… and on and on. Narrowing down the list was torture. Among other things, I wanted to be a great writer, a wise teacher, an admirable dad and husband, a linguist, a wine connoisseur, and an athlete. I was paralyzed. I simply couldn’t tolerate the idea of giving up any one of those dreams.
Finally, driving to the class at which I was to publicly announce my main goal, I had a breakthrough. I realized that all my hard work and ambition had amounted to nothing because I had been spreading myself too thin.
Then I had an idea: “Why not make ‘making money’ my number one goal?” I thought. “If I achieve that goal, I’ll have all the money I need to pursue my other interests.”
At the time, I knew nothing about making money. But as it turned out, that didn’t matter. (Every journey starts in ignorance.) I abandoned, temporarily at least, my many other goals and made “getting rich” my one and only priority.
And it worked. Big time.
Before making that decision, I was earning $35,000 a year. A year later, my yearly income was $150,000. This was more money than I had ever imagined I’d make… so I wasn’t quite sure how to feel about it.
What Ron taught me
“You should feel very good,” Ron (my accountant at the time) told me. He was amused by my excitement. Ron was used to working with high-income earners – most in the million-dollar-plus category.
“Welcome to the world of the rich,” he said.
“Come on,” I said. “A hundred and fifty grand is nothing compared to what most of your clients make.”
“That may be,” he replied. But “$150,000 a year is enough to live like a billionaire.”
“How can you say that?” I asked.
“Think of it this way,” he said. “When you have an income of less than $50,000, it’s a struggle.”
“Tell me about it,” I replied. “I’ve been struggling since I graduated from college.”
“Then, when you boost your income to between $50,000 and $150,000, you have everything you need but only some of what you want.”
“Not sure I know what you mean,” I said.
“I mean this. You can afford a nice, modest home, and you can pay your bills. You can even go out to dinner at a good restaurant once a week and spend a few weeks a year vacationing. But you can’t do those things too elaborately, and you can’t afford to buy yourself toys.”
“Toys? Such as?”
“Such as sports cars, boats, expensive watches, and so on.”
“My $35 watch is fine for me,” I said. “And I get seasick, so I’m not interested in boats. But I wouldn’t mind a little red sports car…”
“Well, guess what?” he said. “Now that you are in the $150,000 club, you can afford that, too.”
“Do you really think so?”
“Sure. Buy yourself a little five-year-old convertible for $3,500.” (Remember, this was 1983.) “Keep it in your garage and take it out on weekends.”
“I’d love that.”
“You can have everything you need and everything you want. You just have to make sure you don’t overspend on what you want.”
“Like limiting what I spend on my sports car to $3,500.”
“Exactly. Right now, the only difference between your lifestyle and the way my wealthiest clients live – and I’m talking about guys who rake in eight figures every year – is the price of your toys.”
“And here’s something else you need to know,” he said as he packed up his papers. “You’ll get just as much fun out of your $3,500 sports car as any of my clients get from their Lamborghinis or Maseratis.”
Ron was right. I bought a Triumph, a TR-6, for $3,200 – and it was the best sports car I have ever owned.
Big incomes and big spending
That conversation with Ron left a deep impression on me. It was definitely a turning point in my financial life. Were it not for his advice, I might well have gone on to do what most high earners in America do: spend my money as fast as (or even faster than) I made it.
I’m sure I could have had great fun spending every nickel I was making (and any more that I could get on credit) by buying a too-big house in a too-fancy neighborhood and having lots of too-expensive toys.
But I’m also sure (because I’ve done a bit of it in spurts since then) that the rush I would have felt would have been very temporary… and that it would have been followed with a bad feeling that would have lasted a lot longer.
Overspending is a major problem for high-income earners for several reasons: They want to show off their income by purchasing status symbols. And they want to reward themselves by buying expensive toys.
They feel that as long as they can pay for what they buy, there isn’t any problem. If they spend every dollar of what they make this year, there’ll be plenty more dollars next year.
The trouble with this sort of thinking is obvious: It makes it very difficult to save money. And if you don’t save money, you can’t build wealth.
Wealth is not about how much you make. It’s about how much you have put aside to spend, if you need to, in the future. To put it in simpler terms: Wealth is not your income but your net savings.
Ron made me understand, at the beginning of my high-income-earning years, that spending extra money on ever-more-expensive toys wasn’t going to give me any more gratification. All it was going to do was put me on the same treadmill with everyone else in the $150,000 club, most of whom would never end up wealthy.
So that’s an important thing for you, too, to recognize now, as we start walking down this long and winding path together.
Along the way, you will see a definite and perhaps sharp increase in your income. But beware of the impulse that may follow – the desire to ratchet up your spending.
A little more spending (as I’ll explain) is a good thing. But too much will sabotage your wealth building efforts.
In the next installment of this series, we’ll take a close look at how much wealth you actually need. (And it’s probably a lot less than you think.)
* In this series of essays, I’ll be updating and revisiting ideas from several of my books on wealth, including two first published by John Wiley & Sons: Automatic Wealth and Automatic Wealth for Grads… and Anyone Else Just Starting Out. Plus several hundred essays published over the past 17 years in a variety of financial newsletters, magazines, and books.