Updated on 03.23.10

Wealth Isn’t How Much You Earn

Trent Hamm

At age 25, Jim makes $100,000 a year. He’s constantly traveling for business. He has a large home in which he often doesn’t visit some rooms for months at a time. He eats out every single night. He drives a leased Lexus, which he updates every few years at the end of the lease. He buys a whole new wardrobe every six months, taking the leftovers to Goodwill. He spends everything he brings in.

At age 25, Bill makes $35,000 a year. He lives in a smaller home and doesn’t travel much. He makes most of his own meals at home. He drives a Toyota Corolla, which he owns free and clear. He wears clothes until they’re worn, then shops at Goodwill for replacements, often picking up Jim’s barely-worn clothes. At the end of the year, he usually has about $5,000 of his income left over, which he sticks into his stock investments which earn 8% a year.

In ten years, Jim’s net worth hasn’t grown a cent. In those same ten years, Bill has $72,000 in the bank.

At the twenty year mark, Jim’s net worth still hasn’t grown a cent. In those same twenty years, Bill has built up $228,098 in the bank.

At the thirty year mark, Jim’s still breaking even. Bill, on the other hand, has $566,416 in the bank.

At age sixty five, Jim hasn’t accumulated a cent and will be working for the man for the rest of his life. At the same age, Bill has $1.3 million in the bank and can do whatever he wants for the rest of his life – and probably already started doing that a few years earlier.

It doesn’t matter how much you earn. It matters how much you save.

When I was twenty five, my net worth was negative and heading south rapidly. I spent more than I earned and I didn’t really worry about the consequences of it. I figured if I had the money – or the credit – I certainly ought to spend it in whatever way made my life more enjoyable right now.

I’m now thirty one. My net worth is still negative (although it would be positive if I counted the value of my home towards it, which I do not), but it grows every month in a positive direction and will soon become positive even without the house value.

One might immediately think that I must have made my life less enjoyable to make that change. Actually, my life is more enjoyable now.

I have a better grasp on the things that actually make me happy and I don’t waste my money on things that don’t.

I’m not chained to a desk and a career, fearing the pink slip – I set my own career rules and goals.

I’m not afraid of getting the mail any more and I don’t wake up at night worried about how I’m possibly going to make ends meet or pay all of this off in the future.

Perhaps best of all, my financial position is improving every single month and I no longer see the long-term future as some kind of musty cloud that will “work itself out.” I know it’s getting better and I know that, if I continue on this path, I’ll be able to easily have some of the big things I actually want in life, like a beautiful house in the country with some wooded land in the back.

My life now is something I’ll happily trade having a shiny new Lexus and an iPhone and a set of high-end golf clubs and eating out every night for. In exchange, I’m not worried about the future and I have career and personal freedom I would never otherwise have.

Wealth has little to do with how much you earn. It’s how you spend – or save – it.

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  1. Brittany says:

    “It doesn’t matter how much you earn. It matters how much you save.”

    Nice. Definitely going to requote you on this.

    However, the title and the ending couple of paragraphs hint at something more… Wealth isn’t just money!

  2. Jennifer says:

    I get the sentiment behind the story but truthfully, of the two people, I’d rather be Jim. He lived a great life for 40 years and Bill doesn’t start living great until 65. Perhaps it would have been more compelling if there wasn’t such a big wage gap between the two people?

  3. Kevin says:

    You commit the classic mistake of ignoring inflation. In 40 years, Bill’s $1.3 million will barely be enough to buy his diapers. Assuming 2% inflation, and a 4% Safe Withdrawal Rate, Bill can look forward to an annual pre-tax investment income of $23,550 in 2010 dollars. After taxes, he might have $18,000 to spend.

    Of course, that’s $18,000/year more than Jim will have, but perhaps the tradeoff was worth it for Jim. After all, Jim spent his entire life seeing the world, driving luxurious cars, and entertaining friends in his beautiful, spacious home.

    The next day, they both have heart attacks and die. Who would you rather have been? Jim or Bob?

  4. Trent Hamm Trent says:

    “Jim spent his entire life seeing the world, driving luxurious cars, and entertaining friends in his beautiful, spacious home.”

    Jim also earned $65,000 more a year than Bob. If they earned the same, they would have roughly similar lifestyles.

  5. marta says:

    I get your point, but it’s also important to live a bit while you are young, as long as you don’t get into debt and can save a bit.

    Not everyone wants to be a homebody, clip coupons and shop at Goodwill. Some people like to travel, or eat at fine restaurants, or something else that takes them beyond their subdivision.

    I am glad that you find your current life to be enjoyable. That’s great for you. It’s not very attractive to me, though (minus the good financial situation, of course), and that’s okay. I just wish you acknowledged more often that Bill (er, Trent)’s way is not the only way.

  6. Ellen says:

    At age 65 (or soon thereafter) Jim will most likely collect social security & be on Medicare, so I disagree that he’ll be working “for the man” to the end of his days. And if he does continue to work “for the man”, it sounds like he’s having a good time along the way!

    Granted, in our society it’s considered a good thing for everyone to plan for the future & take responsibility for saving toward retirement, but I agree with the others that you need to be living the life you want to lead until you reach that age. So whatever lifestyle you choose, should be your choice, & one option isn’t necessarily the good choice & the other bad.

  7. matt says:

    wealthy barber is a better example, but i see the point your trying to make.

  8. Shannon says:

    The stereotype you buy into, which is what I often see on this website, is that the high earner is extravagant AND doesn’t save anything. I know plenty of people who earn big incomes, drive fancy cars, take expensive vacations AND save a ton. Spending money that you have AND saving a considerable amount are not mutually exclusive

  9. wanzman says:

    Screw it – I am going to spend everything I have left after the government gets done taking its ever increasing slice to take care of all the people who cannot take responsibility for themselves.

    Why should I save for retirement when now the governement wants to take care of all my healthcare needs? I am sure by the time I retire they will also want to have us all wearing the same government provided uniforms, driving government vehicles, and eating in government run cafeterias?

    I might as well enjoy my life as much as I can now, before all the do nothings get so offended that anyone has something nicer than what they have – an elect more socialists to destroy America.

    May sound a bit harsh…but really, where do you think all this is headed?

  10. R says:

    Why do the people commenting on here assume that Bill is depriving himself and not having fun? Does driving luxury cars add that much to a person’s happiness? Does changing one’s wardrobe every 6 months really improve the quality of life? Jim is on the hedonic treadmill, while Bill seems to understand what matters in life.

  11. wanzman says:

    I guess my point is, why should I not just live it up today, and instead save all my money, when in the end, we are all going to be in the same boat anyway?

    Might as well be the type that enjoys the hell out of life along the way…

  12. DiscoApu says:

    Bill’s life is just starting at 65? That sucks. I would much rather be Jim. This parable definitely did not do it for me.

  13. Saagar says:

    Its not as straight forward as it looks. Lets say either dies at the age of 60. Jim has enjoyed his life while Bill left the money for someone else. If that is a remote possibility, then think about this. Jim ate at fancy restaurants while he had the age and enjoy it, drove fancy cars when he could appreciate them, while Bill is 65 and gets a BMW but his back ache won’t let him go for a long drive and he cannot appreciate the food since he cannot eat salt due to Blood pressure and sugar due to diabetes. I am all for spending less than you earn, but hey, if you buy from goodwill and eat at home all the time in your prime age, whats the whole point. Moderation is the key….

  14. R says:

    Maybe Jim should have given the money to charity instead of being so materialistic.

  15. Sergio says:

    I believe that the most important part of life (at least related to wealth) it’s not about how much you earn, but neither it’s about how much do you save.

    My believe, and what Trent has been saying for a lot of time (but on this post that idea it’s not really clear)is that living is ABOUT CHOICES.

    Kevin and Jennifer have valid points about this example. We don’t know if Jim or Bill are really happy about their lifestyle, because each people is really different and have very different targets to focus their efforts.

    Again, this is just an example, it doesn’t count the possibility of dying earlier (like Kevin said), or the possibility or having a family, economic stability, job safety or the fact that anybody can change in a certain time of their life (and if Jim changes his lifestyle, this will have more impact in his retirement money that several years from Bill).

    Also, this doesn’t take in consideration that in a lot of countries, “the man” (or big companies) forces you to start a retirements fund (by law), and this will be more common with the time (of course it’s better to start this savings by choice, but it’s a fact).

    At the end, living is only about the CHOICES you make and the REASONS that get you to make those choices. See your chances and try to balance your options.

    Also, I will like to add, that “working for the man” is necessarily a bad thing, most of the time this means following orders and/or that most decisions are made by other people. But if your efforts and choices are good and you like your job, you can have and impact in other people’s life and also became a cornerstone for “the man”.

    (Maybe you’re a teacher, a researcher and writer that works for a big company. Sometimes, being your own boss doesn’t give you the resources to fullfill your objectives).

  16. lurker carl says:

    What if Jim lived frugally and saved that extra $65K instead of spending it immediately on material trappings? Within 10 years he would have over one million dollars saved. Then he could begin enjoying the fruits of his labor.

    This is called having your cake and eating it, too.

  17. Kenney says:


    Driving really nice cars does add to some people’s happiness. We all value different things, and some people truly love cars. My uncle is one of those guys.

    I see a lot of personal finance blogs espouse the same anti-stuff mantra, and I definitely get that. But there is more than one road to take to financial freedom. Once you’re out of debt, the options available to you are great. I think it’s fine to recognize that, and not look down on those who go about life one way instead of the other.

    All other things being equal (assuming they have family and friends) I would rather be Jim too.

  18. Nicole says:

    You can’t live like the first guy on 100K/year without a lot of debt. Even if that large house is a cheap place in the rural South.

    In the examples given, the 35K/year guy can’t afford to live it up and the 100K/year guy can’t afford to live like he’s living. The 35K guy’s savings aren’t spectacular, but they’re in line with being able to retire without losing quality of life.

    So I totally agree that living it up while you’re young is a good thing to do, but only if you can afford it after taking care of your obligations and your future self first. Person #1 is living it up more than he can afford. Person #2 doesn’t have enough income to live it up without having a lower quality of life in retirement.

    “Annual income twenty pounds, annual expenditure nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pound ought and six, result misery.” Charles Dickens, David Copperfield

  19. getagrip says:

    The problem in this example, as pointed out, is that we don’t how either guy is, or isn’t, enjoying their life. I know some folks who love that they travel for business. I know more who after a few years of being on the road more than they’re at home, are really sick of it. I know folks on middling to decent incomes who buy older cars and restore them, then drive them for a while until their next project car. I think the point here is that Jim didn’t bother considering the future, and has ended up potentially getting trapped where had he saved even some money he’d have more options. I’m constantly surprised by the folks I occasionally run into earning into six figures who are living paycheck to paycheck. At some point they either have to wake up or pay the piper.

  20. Courtney says:

    Good point, Lurker Carl. I would say that ‘wealth is partly what you earn’ if only because earning more gives you more choices. Jim can choose to save as much as Bill ($5K a year) and still enjoy a substantially higher standard of living during his working years, probably without even making too many cutbacks, because that amount is a much smaller percentage of his income. Jim could also choose to cut back to Bill’s standard of living and save millions by the time he’s 65 (over $18M, at 8%). Or he could do something in the middle (which is what we do).

  21. Des says:

    You’re also forgetting that housing appreciates. 40 years ago, the average cost for a house was about 1/10th what it is today. Houses have increase in value tenfold since 1970. If each of these men put 20% down, and bought the max they could qualify for (28% of GMI) then Jim’s house would cost 462,000 and Bill’s would be 170,000. After 40 years, Jim’s would be worth 2.92 million MORE than Bill’s. At that point, he could sell it, buy a home like Bill’s, and they would be square even except Jim would have more that double what Bill had and would have lived the life he wanted. Yes, that makes assumptions about the housing market, but Bill is betting on stocks himself, so I think that’s a fair assessment.

  22. It’s funny because I work for people like Jim, only they make more than $100,000 per year. The sad thing is, with all the traveling, working and being away from home (eating out etc) they’re constantly missing family, feeling guilty over time they didn’t spend with their kids, and trying to enjoy the material things without the emotional gratification.

    I love my life, enjoy every second I have home with my husband and no fancy restaurant could be better than that.

  23. Sara says:

    The nice thing about making $100k a year is you can eat out a couple times a week, go on some cool vacations (if that is your cup of tea), and STILL save more than $5k per a year.

    It does matter how much you make. For sure.

  24. Yeah, but if you were that $100,000 dollar guy living like the $35,000 dollar guy… Then you could potentially get to a semi-retired state at 40. The best of both worlds!

    IMHO, Wealth accumulation is about both offense and defense… Offense being the income you bring in (passive, earned, residual…) and defense being the amount you frugally can squirrel away!

  25. Ashley says:

    I’m currently reading Soccernomics and in one of the chapters, the authors quote a study stating that over $15,000/year in income, any increase in income does not correlate with an equal increase in happiness. As described in the book, this was true worldwide, though I don’t have a link to confirm.

    Assuming Jim and Bill are just two average guys, since the example didn’t tell us how happy each of them might be, the study data shows that Jim is NOT likely to be any happier than Bill.

  26. Johanna says:

    @Ashley: But is Bill likely to be any happier than Jim? Because the article is implying that he is.

    What I dislike about articles like this is that if you have to focus on other people’s misery (either real or imagined) in order to feel good about yourself, then maybe you’re not as confident in your own choices as you think you are. Why does it matter whether a hypothetical person earning $100k a year saves or not, lives beyond his means or not, is miserable or not, or enjoys his job or not? If you’re enjoying your life on $35k a year, isn’t that enough?

  27. Johanna says:

    Another thing that bothers me (and this is in no way a criticism of Trent – there’s no reason why he should have had this interpretation in mind when he wrote the article) is that the article’s tagline was used almost word for word by another commenter a while back to argue that victims of salary discrimination should stop whining and just be glad they have jobs. After all, it doesn’t matter how much you earn, just how much you save, right?

    I know this is a tangent, but what if other people in Bill’s workplace are doing the same job but are earning $45k instead of $35k. If Bill earned that much, he could save three times as much while living the same lifestyle, and be ready to retire that much sooner (if that’s what he chose to do). Try telling him that that does not matter.

  28. Roscoe Casita says:

    Assuming an Annual 8% return is a MAJOR assumption, the only semi-guarantied return are Bonds, (as they have recourse, not guaranties.)

    Even then when Govie bonds where yielding 8%, inflation was at 15%+.

    When Govie bonds where 15%, Inflation was RAGGING!

    Assuming future returns is a fatal flaw.

    You can only count what you can save, not what you might earn on some future possible investment.

    What if markets decline 80% +? It happened many times before, where does that leave you then?

  29. almost there says:

    Grasshopper vs the ant tale. But what if the gvt takes it in the end as this guy writes from articles gleened from the newspapers?

    (dubya dubya dubya dot) ronaldholland (dot)com/ira-pensionnationalization (dot)htm

  30. Hope D says:

    My husband was considering a business venture with a man who made 4 times as much as us. There was little risk in the business but did require some capital investment. We told him we couldn’t reduce are income monthly too much because we were living close to our expenses. He said he was in the same boat. He said at the end of the month our family and his had the same amount. I told my husband that is not true. They had lots of places to cut. They took overseas vacations. They had two new cars. They ate out all the time. They had every new electronic gadget that came out. A cut in any of these areas would have given them more money. For us, there was nothing to cut.
    To me the biggest difference between Jim and Bill is point of view or goals. Jim can at anytime change his point of view or goals. He will then be in a much better place than Bill. I don’t know that Bill will ever be able to make what Jim does. BUT Jim can live on what Bill does. He won’t even have to live as frugally to save twice as much as Bill. I would much rather be Jim. He has lots of potential.

  31. Courtney says:

    “What if markets decline 80% +? It happened many times before, where does that leave you then?”

    The markets have declined 80%+ many times before? What graphs are you looking at? In the history of bear markets, only one (1929-1932) has been over 50% from peak to trough. Google “bear market comparisons 1929-2009” to see the numbers for yourself.

  32. Gretchen says:

    I’d argue “wealth is more than your savings.”

    What’s the piont of 1.3 million in the bank if you never have any fun?

  33. BonzoGal says:

    Why does everyone assume that Jim’s life is more fun than Bill’s?

    -Constantly traveling for business.
    (I’ve done this and it’s interesting at first, then exhausting. Traveling for business doesn’t mean you get to see anything or do anything fun- it means you see airports, hotels, and conference rooms.)
    -Large home in which he often doesn’t visit some rooms for months at a time.
    (What’s the point of that? In other words, he’s not enjoying all that space.)
    -Eats out every single night.
    (Fun once in a while, but tiring when done too often. On business trips, I’d long to be home eating something I’d made.)
    -Drives a leased Lexus, which he updates every few years at the end of the lease.
    (I’m not interested in cars at all except as a form of transportation. YMMV, literally…)
    -He buys a whole new wardrobe every six months, taking the leftovers to Goodwill.
    (I guess if you like shopping, that’s fun. And it seems pretty wasteful- but someone else gets the clothes, so they benefit.)
    -He spends everything he brings in.
    (That’s the point here- some folks have commented that many wealthy people save money- but that wasn’t the point of this essay. It was comparing people who DON’T save.)

    -Lives in a smaller home and doesn’t travel much.
    (Smaller home isn’t un-fun. It’s nice. Even nicer is not owing a huge mortgage and paying huge property taxes. The travel part- I like to travel, but I avoid putting it on a credit card, so I probably travel less than I’d like. But I also don’t have that debt, which makes my non-travel life great.)
    -Makes most of his own meals at home.
    (Cooking- fun and usually healthier!)
    -Drives a Toyota Corolla, which he owns free and clear.
    (Again, if cars as a status symbol or toy are important, YMMV. I don’t care what kind of car I drive as long as it’s reliable.)
    -Wears clothes until they’re worn, then shops at Goodwill for replacements.
    (I’ve gotten some wool suits at Goodwill- nearly new, very au courant, and they cost $20 vs. $300. I don’t buy this way all the time, but it’s fun to see what you can find that way!)

    All in all, I don’t see that Bill has a less satisfying/fun life than Jim. YOU DON’T HAVE TO SPEND MONEY TO “LIVE A LITTLE.” You can have fun in jillions of different low-cost or free ways and have no debts to plague you. (Ask me about my radio show or my cycling trips or my stand-up comedy career- those things were big fun and cost me nada.)

    I’m pretty sure that’s Trent’s point here. He’s suggesting a new way to look at things, not telling you that you have to do it this way.

  34. Derek Cormier says:

    Great story, I will most likely reference it on my little corner of the world in the next day or so.

  35. Sara says:

    Wow, I’m surprised to see so many reactions of, “I’d rather be Jim because he enjoyed his life!” Isn’t delayed gratification one of the biggest principles of personal finance?

    I do think the stories are presented in a false dichotomy — either spend every cent you earn and save nothing, or save as much as you can but don’t have any fun. $100k/year is enough to live comfortably but still save. Jim wouldn’t have to alter his lifestyle too drastically to save the same $5k/year as Bill. If he saved the same percentage as Bill (about 15%), he would be saving 3 times as much but still be able to live a more luxurious lifestyle than Bill.

    So yes, the amount of money you save is important, but it’s a lot easier to save when you earn more.

  36. Anthony says:

    Nice article. I *was* going to say: If I had to pick, I’d rather live Jim’s life, in this example.

    Even more to the point though, I would live like both guys. Why not enjoy life NOW and save to enjoy it LATER?!

  37. Cambo says:

    I’ll be mighty annoyed after investing extra into my superannuation (retirement) I die before I get to enjoy it!

  38. Strick says:

    Jim probably got more “fun” out of spending then Bill did, and Bill got more out of saving toward his goal. Truth is, sounds like Jim & Bill’s lives both stunk.

    Arty made what Jim made and spent what Bill spent. He only “worked for the man” for 13 years out of his 86 year life. Jim always worried about money and stuff. Bill spent most of his life working to be free.

    Arty shakes his head at both of them. (Only Henry laughed at Arty. Henry didn’t even have to sacrifice the 13 years Arty did. He always did whatever he wanted, he only learned how to monetize it….)

  39. Todd says:

    I have to admit that I really like Johanna’s reply. Why does it have to be about comparison with other’s people’s happiness or misery? Bill and Jim could both be happy, or they could both be miserable. The point is that it’s usually a good idea to live in the way that will maximize your own happiness, and almost always a good idea to live on less than you make. Why be obsessed with the “bad” choices other people are making? It makes the one casting judgment sound like Dana Carvey as the church lady.

  40. lmoot says:

    Wealth has A LOT to do with how much you earn (maybe not everything). Bill (assuming he will make only 35k/year and the equivalent with inflation in mind) will never be wealthier than 35k/year. Jim at least has potential to build his wealth faster when/if he so chooses.

    Just to show how much wealth contributes, why don’t you set the example at Jim still making 100k per year, and Bill making 35k per year…then each SAVE, spend, and invest the same percentage per year. Who will be wealthier? You can even play with the numbers and have Bill save and invest twice the percentage of Jim, and Jim will still come out wealthier…because of HOW MUCH MORE HE EARNS.
    Making more money will always put you at a better advantage, financially, than someone with the same saving/spending habits that is making less.
    I’ve always been frugal, and raised in a frugal family. To me, not having a Lexus, or i-phone is not a trade, because it’s not anything I ever desired. If I made 100k I wouldn’t desire them. the fact that you still (and always have based on past articles using the same examples) consider them “trades” does not help to convince me that you are truly satisfied/happy with your decisions. Just once, and I’m being serious, I would like to see an article that’s self-sustained without having to rely on others’ choices to highlight why the choices you made is the “better” one.

  41. AnnJo says:

    A lot of people in the comments assume that Jim, the high spender, “enjoyed” his life more. Not only is Trent’s point that it isn’t necessarily true, but in my experience, high earners who are trapped in a high expense lifestyle, spending more than they make, are often extremely stressed about it. And if they’re married, long-term strain and conflict over how finances are being handled is a frequent contributor to divorce.

    And who seems really happier to you: Someone who drives a recent-model luxury car and can say to himself: “This car is going to make everyone who sees me envious, and won’t it show everyone how cool I am, at least for a year or so.” or someone who can say, “This car is my paid-off, loyal, old friend, takes me where I want to go, and asks practically nothing in return.”

  42. Kelly says:

    Or you could be like my cousin. He worked hard to support his family so his wife could stay at home with their girls, bought a nice house and was working OT at his job to fix it up even nicer. He didn’t take big fancy vacations or drive fancy cars. He was working hard now so his family could enjoy life.

    Then at age 33, he gets pancreatic cancer and was dead by age 35.

    Things like that happen to a lot of young people. You just don’t know when you’re gonna go so I say you should have fun while you can because you never know when it’s gonna be taken all away from you. Without going into debt of course.

  43. cathmom says:

    I’m noticing lately that more posts seem a lot like articles from The Tightwad Gazette. Of course, there’s probably a lot of readers here who have not read TG completely through multiple times, so that’s all right I guess.

  44. cathmom says:

    I’m noticing lately that more posts seem a lot like articles from The Tightwad Gazette. Of course, there’s probably a lot of readers here who have not read TG completely through multiple times like me, so that’s all right I guess.

  45. Roscoe Casita says:

    Courtney : If your only looking at from 1929 -> present on the Dow Jones index, then it happened 1 time.

    Tulip Mania 2500f -> 10f
    South Seas Bubble £1,000 -> £150
    Nikkei Index in Japan 39000 -> 7500 (Still 50% down)
    NASDAQ Index 5000->1100 (Still 50% down)

    1835->1842, Dow Jones fell 70%.

    Many instances of multi-year losses that destroy “8% annualized” returns.

  46. wanzman says:

    #40 Imoot said:

    “Just once, and I’m being serious, I would like to see an article that’s self-sustained without having to rely on others’ choices to highlight why the choices you made is the “better” one.”

    I agree.

    To me it seems that this entire blog is about Trent justifying to himself (and perhaps others) the decisions he has made and the things he has chosen to give up in life. I am not saying his decisions are right or wrong. But there sure does seem to be a ton of effort spend justifying the lifestyles of people who work their entire lives at saving every possible penny.

    More often than not, the lesson tends to come at the expense of some hypothetical high earner who blows every penny they make (and more) pursuing some fantasy lifestyle.

    I am not sure who or what Trent is jealous of, but to me it seems obvious that there is some internal battle going on here to justify life his decisions with regard to finances.

    The post I am really waiting for is this one:

    One day, Bill gets really restless, and to be honest, a bit jealous of Jim, so he runs out and buys a brand new hybrid vehicle on credit, thereby destroying any amount of financial credibility that me may have had. Not that buying a hybrid vehicle on credit is inherently bad, you see. Its just that Bill spend all those years preaching to us about living a modest lifestyle and avoiding debt, and then one day runs out and buys a very trendy vehicle that is more expensive than is really needed – and finances it. These completely goes against Bill’s prior preachings, and from then on, everyone just thinks Bill is a cheap phony.

  47. Jeannette says:

    How much you CAN save is directly related not only to what you spend, but to what you earn.

    The more you earn, in theory, the more available to save, again depending on what you spend.

    Earning power is something that vacillates greatly in life. Something you really don’t understand in your 20s and 30s, when all you can see is opportunity.

    As you age, no matter what you do, things change. Especially today, when you may have to not only find a new job, but a new career path and new industry to work in, in your 30s, 40s, 50s and beyond. And you have to compete for those jobs with people who may be 10, 20, 30, or even 40 years younger than you.

    Saving is great, but you also have to do as much as you can to stay on top of your business, skill set and ALSO to plan ahead to learn new skills.

    We’ve got friends in their 30s and 40s in publishing who can no longer get work…experienced execs, willing to take huge pay cuts, and they are basically being told: We don’t want you. They are trying to reinvent themselves, but again being told: We don’t want you.

    And I wont’ talk about the struggles those of us who are even older are having.

    People in this country need to focus on job creation. You can’t save much if you don’t have an income, or one that will steadily decline as you age!

  48. Jeannette says:

    To wanzman, #9 comment

    You are tired of “carrying” those who are not responsible for themselves? Really?

    So everyone in this country is not only created equal but they have equal job skills, training and experience and all the other stuff potential employers want?

    Some of those people without health insurance? Look around my friend. Many work 40+ hours a week for low wages for bosses who make big bucks but the companies still don’t pay for health care.

    They miss a day of work being sick and they are docked.

    Are YOU docked by your employer if you miss ANY time for work? These people are not shirkers.

    Meanwhile, if we’re gonna rant about “carrying” people, let’s talk about all the workers in life who make relatively little money and meanwhile, they do the work and carry their bosses and managers. LITERALLY.

    THOSE are the people I have an issue with in life. The manager who makes a bonus off the hard work of employees who do THEIR job, who get the new clients, who do the work to KEEP the clients, etc.

    Oh, and let’s not forget the CEOs and such of companies who drive companies into bankruptcy, put companies out of business and STILL take home big bucks.

  49. wanzman says:

    @ Jeanette #48:

    I am just concerned that more and more things in this country are becoming governemtn provided items that everyone thinks they should get for free. Where does it stop? Today healthcare, what’s next?

    Why should people who earn a lot of money and pay a lot of taxes have to provide housing (section 8 or public housing), food (food stamps) and now healthcare to people who pay very little in taxes.

    I just find it very scary when people who don’t have something have the ability to vote it to themselves, but ask the “rich” people to pay for it…how long before I am paying for socialized iPhones for everyone, just because they think it is their right?

    Everyone may not be equal in abilities or in dedication and desire – but tough. That is just the way it is – life is not fair. That has to be some reward for standing out.

    “Meanwhile, if we’re gonna rant about “carrying” people, let’s talk about all the workers in life who make relatively little money and meanwhile, they do the work and carry their bosses and managers. LITERALLY.”

    I call BS…if you (or someone else) is that great of a worker and that valuable, either the company will pay you what you worth, or you have the right to go somewhere else to earn more money. You might say, well there isn’t anywhere else I can go to earn more….if you are TRULY that valuable, then someone will want/need you.

    And don’t forget, those people above you probably own the company or had a stake in creating it, so without them, you wouldn’t even have a job.

    If you want to complain about the system so much, and you think it is so easy to be a CEO, why not start your own company where you can set your own pay and earn huge bonuses? Then maybe you can pay your secretary $150K per year and break the trend of employees not getting paid enough…

    Stop whining, and try to be part of the solution if you think your situation is currently that bad. You’re relying too much on others.

    And by the way, I am not some wealthy CEO looking out for myself. My wife and I are young and make average income, but we believe in personal responsibility…something that is long since dead in the USA.

  50. Johanna says:

    @wanzman: I can’t believe I have to point this out to you, but housing, food, and healthcare are (or can be) matters of life and death. As far as I know, nobody’s ever died for want of an iPhone.

    I, for one, don’t want to live in a society where people die because they’re down on their luck. Are you saying that you do?

  51. Matt says:

    I’m a little confused about how Trent’s net worth (excluding the home value) since he no longer has credit card debt and has a healthy emergency fund. Does he mean that he does not include the value of the home in the calculation but does include the mortgage remaining?

  52. Matt says:

    Sorry, meant to say “confused how his net worth is negative”.

  53. Courtney says:

    Matt – Yes, there was a lengthy discussion when Trent announced he was going to include his mortgage but not his home value in his net worth. Which means he’s not really calculating his net worth, but some pseudo-version of liquid assets (if Trent rented would he include his annual rent payments in his calculation? Of course not).

  54. Kevin says:


    Courtney is right, and your confusion brilliantly illustrates precisely why Trent’s practice is a bad idea. He’s calculating something that is not his “net worth,” and publicly referring to it as his “net worth.” Your confusion is perfectly understandable, and hopefully serves to motivate Trent to stop misuing words with otherwise clear and established definitions.

  55. wanzman says:

    @ Johanna #50: If health is so important to Americans, then why are the the most obese country in the world?

    Its hard for me to subsidize others healthcare when they don’t even care about their own health. It is free to go outside and exercise. Nowadays people only want what the government tells them they need and then offers to provide for free. I am not saying people will die without an iPhone, I am just saying, a lot of wealthy people have them, so if someone decides that its a right, poor people will be up in arms until the governement provides them for free.

    My works as a supervisor in the local section 8 housing department. Per my wife, 95% of people on section 8 housing are simply too lazy too get a job. Also about 95% of those same people have an iPhone.

    You’re telling me these people have a genuine life and death need? BS. People in Africa have life and death needs. People in the US are spoiled and lazy and looking for another handout.

  56. Johanna says:

    @wanzman: It’s good to hear that you’re concerned about people in Africa. I guess you’re donating at least a couple of hundred dollars a month to help them? How do you decide what organization to donate to?

  57. wanzman says:


    I donate over $1,000 per month to the needy people in the United States (by paying taxes).

    I donate another several hundred dollars per month to my church, which is used almost exclusively to help people in need all around the world (all of the church’s normal monthly budget is ran from other private donations).

    I also donate several hundred dollars per year to my local United Way organization which helps several local charitable agencies.

    I donate physical goods several times per year when my church sends care packages to certain groups of people, such as those in Haiti affected the the earthquake, shoes for children in Africa, etc.

    I also donate clothing and other household items to Goodwill several times per year, which helps create jobs locally for mentally disabled individuals, and also creates a cheap place for those less fortunate (and for bargain hunters) to shop.

    I would love to donate more for things that truly needy people need to survive.

    It is my opinion that the vast majority of people in the US have way more than they really “need”, and giving another handout will do more harm than good. That is my opinion, and I am entitled to it.

    I understand from reading your frequent comments on this blog that you believe your opinion carries more weight due to the sarcastic nature with which it is delvered….but it is not.

    Good day.

  58. Evita says:

    @Johanna #50
    Once again, I agree with all your common-sense comments.
    And I was irked rather than inspired by this post….. mostly because all the big-earners that I know are also savers (maybe not at age 25 but certainly later in life).
    Black-and-white examples do not do it for me because real-life is not like that.
    And last of all, I wish to congratulate all the Americans for their new universal health care system! it is the mark of a truly civilized country!

  59. Johanna says:

    @wanzman: It was a serious question – no sarcasm was intended whatsoever. International aid is tricky, and I’m always on the lookout for other people’s perspectives.

    For example, some have argued that donating shoes to children in Africa might not be all that helpful (google “donating shoes and other aid fads” for an article by an aid worker).

  60. reulte says:

    Trent (#4) “If they earned the same, they would have roughly similar lifestyles.”

    I’m sure I disagree with this statement. A lifestyle is not based upon the amount earned — hence the statement “champagen tastes on beer budget”. If Bill earned $100,000 annually, he wouldn’t necessarily rent Lexus vehicles and replace his wardrobe biannually, nor would Jim necessarily stick to a budget within his income.

  61. Courtney says:

    Roscoe Casita – Tulip Mania and the South Seas Bubble were hardly ‘markets’ in the investing sense – more akin to individual stocks. The NASDAQ I consider more ‘sector-specific’ (technology) and thus again, more risk than the overall market. Wikipedia says that Dow Jones & Co was founded in 1882 and the DJIA wasn’t founded until 1896?

    Personally I like the S&P 500 as a measure of the ‘market’ rather than the Dow.

  62. SoCalGal says:

    Wanzman stated:
    how long before I am paying for socialized iPhones for everyone, just because they think it is their right?
    Your entire argument goes out the door when you make ridiculous statements like the one above. Sorry, but Johanna wins this round.
    Have a great day everyone…you deserve it :)

  63. wanzman says:

    @ #58 Evita:

    “And last of all, I wish to congratulate all the Americans for their new universal health care system! it is the mark of a truly civilized country!”

    I think you meant to say – “Congratulations on the new bill you will get to begin paying immediately, but which you will not benefit from for a number of years, and by that time, the governemtn will probably have squandered the money, so you will get to pay for it again!”

  64. marta says:

    It’s not an universal healthcare system either… but that’s a topic for another time.

  65. wanzman says:

    @#62 SoCalGal:

    If you’re really living in California, you of all people should have sympathy on this matter – your state is almost bankrupt, and the rest of America will soon be bailing Cali out.

    Nacy Pelosi = California = Scary

  66. Adam says:

    @Wanzman, please go post on Foxnews forums or something; your right wing rants would be more fitting there. This is a PF blog, not a political forum.

    On topic:
    I too am a bit concerned that there is no middle man presented in this story. What about Bob, who earns $70,000 a year; saves 10% of his income for retirement, and lives life pretty well while young and still retires young? I don’t understand why the example of extremes has to be used. Either a person is a frugal miser or a complete spendthrift without an ounce of common sense. We’re not all ants and grasshoppers.

    And for the record, I’d MUCH rather be Jim. He sounds like a really fun guy.

  67. wanzman says:

    @ #66 Adam:

    Politics has become a very important aspect to personal finance, especially when the government keeps taking a larger slice of my money to give to other people.

    My comments are not meant to be political, I think the Republicans and Democrats are both way off base.

    Take your fox news comment and shove it you know where. This is an open forum.

  68. Adam says:

    “shove it you know where”

    Nice to see you’ve devolved into school yard level of retorts…*sigh*. Politics has nothing to do with this post, at all.

  69. katie says:

    What if Bill’s toyota accelerates out of control? Jim’s Lexus will be fine as long as it’s not in Bill’s way!

  70. SLCCOM says:

    Wanzman, has it ever occurred to either you or your wife that many, if not most, of the Section 8 residents have health problems that are REFLECTED in their weight, not due to their weight? Many have things like untreated depression, arthritis, autoimmune diseases and infections.

    I would like to be a good enough person to say that I hope you never have such problems, but…

  71. Ed says:

    Another twist to the story:

    The company Jim works for goes bankrupt and Jim loses his $100K job. He’s 55 years old at this point and finally finds a job that pays $65K. With no savings, he loses his house, car, expensive vacations, etc. Maybe at this point he runs up his credit cards and winds up declaring bankruptcy. His best case scenario would be to save all he can for the next 10 years so he can have a little nest egg to augment his meager social security check.

    It happens.

  72. Aaron says:

    This scenario is a Rorschach test for readers, isn’t it?

    I think the point is that financial freedom is independent of salary, and you don’t really have any if you don’t have savings. That’s it. Full stop.

  73. lmoot says:


    “doesn’t travel much”, “He wears clothes until they’re worn, then shops at Goodwill for replacements” “At [65], Bill has $1.3 million in the bank and can do whatever he wants for the rest of his life”(the 15 years or so that’s left of it).

    Any point of financial freedom was lost in the ludicrousness as most here would agree (and have agreed) that the above is not financial freedom for *most* people. These are extremes in which, IMO, neither is maximizing the benefits of earning and saving money.

  74. nb says:

    The right thing to do is to save a certain percentage of your income.
    That way you will not spend all you got and you will have a cushion for the future.
    Please don’t forget to reward yourself from time to time.
    If you reach a specific goal, do something that you really enjoy and something that you can remember later on. It does not matter if it’s a camping trip to the Grand Canyon or a cruise, it matters if it was great for you.

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