I spend a fair amount of time each week reading personal finance books and websites and other materials in order to come up with strategies to employ in my own life that might eventually turn into good material for articles, as well as to find answers to questions that readers ask. In the course of that reading, I often bump into the life stories of people who make a lot more money than I do.
I’ll see stories of families making hundreds of thousands of dollars a year, or even millions a year. I’ll read about people with houses straight out of Architectural Digest, driving BMWs, going on long trips all over the world, and managing portfolios worth millions or tens of millions or even more.
When I read those stories, there’s an inner voice inside of me shouting that these people are living a lifestyle that’s unrelatable to my own and that there’s literally nothing I can learn from them.
That’s decidedly untrue (and we’ll get to why in a minute).
At the same time, I’m aware that Sarah and I combined make a little more than the average American household income. We don’t rake it in hand over fist by any means, but we do all right. We own our home. We are able to put a healthy amount of money aside for retirement (largely due to our personal choices).
For some people, our story is just as unrelatable. There are readers who read The Simple Dollar and, I’m sure, have that inner voice shouting that the story being told here is unrelatable and thus there’s nothing that they can possibly learn from the site.
When you feel like that, step back and consider some things. There is still a ton of useful information to be found, perhaps even more than you’d find in a story from someone similar to yourself.
Are You Seeing the Full Picture?
The first thing to consider is whether or not you’re seeing the full picture of this person’s story.
Condensation: Often, someone’s story is condensed down to a few sentences and a few numbers that do little to actually convey the full story of their life. Those numbers create a particular image in your head that is often not close to the truth of their life.
For example, let’s say I’m reading about Jim, who makes $105,000 a year and is struggling to make ends meet. To me, on the surface, that might be unrelatable. But let’s dig deeper.
Jim is living in San Francisco, which has the highest cost of living in America. The buying power of $105,000 in San Francisco is the same as $50,000 in Des Moines, or even less in rural Iowa where I live. He can barely afford rent on an efficiency apartment at those prices. Jim is dealing with a pile of student loans.
Yes, if Jim lived down the road from me and had that same exact job, he’d be in much better shape. If Jim wasn’t facing a pile of student loans, he’d be in much better shape. But that’s not the reality of Jim’s life.
However, if I look at just one sentence of information about Jim – “Jim makes $105,000 a year and can’t make ends meet” – he seems like a person with a big spending problem that I can’t relate to. Look a little closer and the problem seems much more relatable and relevant.
There are many, many, many factors in a person’s story that often aren’t revealed due to brevity. You don’t know if a person is taking care of their parents or if they’re receiving help from their parents. You don’t know if that person is dealing with an unstated medical issue. Often, you don’t know where that person lives and how that cost of living compares to where you are – there are huge differences in different places in America, let alone on a global scale.
Don’t just blow off a person’s story because of a one sentence or a one paragraph description. You often have more in common than you think, even if the numbers don’t seem compatible at a glance.
Truthful numbers: Another factor, one that often pops up on message boards or on sites where individual anonymous users submit comments, is that people are often dishonest even about the few numbers they reveal. They’ll often overinflate their income or make unbelievable claims about their investing prowess or some other nonsense.
Take such claims with a grain of salt. Don’t assume that “billybob303” who claims he is making “$200K” and has “$1.2M in stocks” is being fully honest with you. (In fact, you’re probably better off avoiding the advice of “billybob303” entirely.)
Life choices and challenges: Another factor to consider is all of the life choices and challenges that have made up that person’s path.
For example, you might be reading the story of someone who has spent their entire life working extremely hard to reach a career goal. They may have spent their high school and college years hitting the books while others partied and then busted their tail for years to get to their current career and income level.
Or, you might be reading the story of someone who has overcome mental health challenges, or had to help raise their younger siblings when their parents died young, or any number of things.
Be careful not to add your own assumptions to the story that makes it easy for you to discredit that person. Just believing someone is “lucky” or someone was “helped” or someone had “privilege,” true or not, means that you’re cutting yourself off from what you might learn from the story.
How Are They Struggling?
Understanding their background is only part of the picture. Each of us is struggling today with different things, and understanding that can change how you view a story.
Life challenges: That person might be dealing with a health issue that they’re not talking about. That person might be caring for a sick elderly relative. That person might be highly involved with a charity and constantly spends their pocket money helping it out without tracking receipts. That person might be dealing with an angry boss or a manipulative ex. That person might be trying to connect with an angry fifteen year old child. That person might be dealing with mental health concerns. There’s always more to the picture.
Almost every single person you meet is dealing with some kind of challenge, whether you see it directly or not. Often, they never speak of it, because all of us want to put our best face forward to the public. We talk about the high salary, not about the stress or the endless hours of work or the damage it does to our relationships or the sacrifices we had to make to get there.
Poor spending choices: Many Americans are simply not aware of personal finance on a day to day basis. They’re vaguely aware that they should save for the future and that they should save for retirement, but our cultural moment is one in which people are inundated with examples of affluent lifestyles and people unconsciously try to match those lifestyles to the best of their ability and then use their money to keep the scaffolding in place.
This doesn’t make them bad. It makes them normal. It makes them people whose focus has been on other areas of their life – see the struggles and life challenges listed above.
When you read that someone is making a lot of money but was “struggling to make ends meet,” that person likely was using their limited amount of focus left over from their career and life challenges and stress to focus on other areas of their life – their marriage, their children, their community standing, the causes they care about, and so on. That doesn’t make them bad, and it doesn’t make their financial changes somehow unworthy.
Indecision: At the same time, many people don’t make financial changes due to indecision. They’re often unsure what to do. Heck, I’m sometimes unsure what to do.
What that means is that people will often end up repeating the same mistakes over and over and over and over again until the drawbacks of those mistakes accumulate to an overwhelming level. In other words, people dig a nice deep hole for themselves. Often, the hole is so deep that their current financial level isn’t going to fix it immediately, even if they seem rich to you. Sure, they might have a 20 foot ladder which would be perfect for the 20 foot hole you’re in, but they find themselves in a 40 foot hole.
What Strategies and Tactics Are They Actually Using to Succeed?
The point of all of this is simple: you cannot simply take someone’s story at face value. At first glance, they might seem to be so far apart from your situation that there’s nothing you can learn, but consider filling in the blanks in a different way and you might see a story more similar to yours than you think, and when you see that similarity, then you can step past the story and look for the real value – the strategies and tactics they’re using to succeed.
The truth is that almost anyone who is working seriously toward a goal similar to your own probably has strategies and tactics you can learn from. The trick is to look past the differences in their story and look for what’s the same – the big goal.
What you’ll find is that if you look closely at almost any story of someone turning around their finances, you’ll see a handful of tactics that pop up again and again, regardless of income level or situation.
Hard work: The turnaround isn’t going to be easy. It’s going to require making some hard decisions and some lifestyle changes. The path of least resistance is how people get into a financial mess, and getting off of that path is how people get out of a financial mess. People will have to step out of their comfort zone and do things differently.
Spending less than you earn: This is the core principle of every financial story. How can you live your life while spending less than you’re earning? Then, how do you use that extra to fix your financial situation? Virtually every financial success story holds this at its core.
Avoidance/elimination of high interest debt: You’ll never see a story of financial success that involves taking on high interest debt. Why? It’s financially disastrous over the long term. There are situations where low interest debt – a home loan or a refinance or a student loan or a first car loan – might be the right call. However, financial recovery doesn’t involve payday loans or credit cards.
Investing: Once the person has their debt under control, they’re usually looking at doing something productive with their extra money while they continue to spend less than they earn. That extra money goes toward big goals, often retirement.
It doesn’t matter whether that person is earning $30,000 a year or $800,000 a year, those are the elements of the backbone of virtually every financial success story out there in which people fixed things for themselves. Don’t look at what’s different. Look at what’s the same.
Do the Specifics Apply to My Life?
Once you see the big picture and realize that the high income earner is actually on much the same journey that you’re on – fixing their spending, fixing their debt problems, saving for the future, overcoming bad habits, learning to spend less than they earn – then you can start looking at the details.
Hard work: How is this person making difficult choices? What are they thinking about when they make those choices? What are they prioritizing, and what are they not prioritizing? Are those priorities that I share?
Spending less than you earn: What spending cuts is this person making? Are those bills that we share? Can I make similar cuts to those bills? If this person is squeezing 20% out of their food budget by eating at home more, can I do the same?
Avoidance/elimination of high interest debt: How are they cutting the credit card addiction? What’s their debt repayment plan? How can I use what they’re doing to improve my own plan? Remember, millionaires sometimes realize they’re in a debt hole and cut up their credit cards, too.
Investing: What are this person’s investing goals? How are they going about reaching them? What are they choosing to invest in, and why? What kinds of accounts are they using, and why?
Whenever you see someone’s story, those are the questions you should be asking, once you realize that they’re actually struggling with many of the same financial issues as you are. What are they doing about the similar issues that they’re facing?
The Big Picture
The big picture is this: We often focus on the differences between us and use that as a reason to avoid thought and action when what we should be doing is looking for the similarities and using those similarities as a source for ideas and inspiration. It is so, so easy to just turn off the brain when you see someone making five times as much as you and living an amazing lifestyle. Surely that person’s life has nothing to do with yours. However, their principles of financial success are basically the same as yours.
Spend less than you earn. Avoid and eliminate high interest debt. Invest for the future. Make hard choices.
That’s the story, and that story is repeated again and again, regardless of income level and background and specifics.
Don’t worry about the specific numbers. Don’t sweat that person’s income right now or their net worth. Instead, focus on the goals they’ve got for themselves, the basic structure of how they’re trying to achieve those goals, and then see what you can learn from their approach. You might find you can learn a lot more than you think, and if nothing else, it’s incredibly powerful to see that so many of us are really in the same boat.
Always be looking for similarities to your own situation rather than differences. When you do that, you’ll see solutions and answers all over the place.
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