Sunday, June 14, 2009
Never Become Middle Class
In an earlier post, I mentioned that one of my rules for success was "Never become middle class." I got a lot of email about that, asking me to explain. Here goes:
There are two classes in the U.S.A.
1) Rich People
2) Poor People
The genius of this country is that in order to change class, all you have to do is change the amount of money you have.
There is a third, imaginary class of people called "The Middle Class." This group is composed of people who would become rich if they would stop pretending to be rich.
Imagine this scenario:
You and your spouse live in a trailer/apartment. Between the two of you, you are making about $35,000 a year. Life is okay. You have an ugly used car that runs, and you have never missed a meal.
One day, one of you gets a promotion at work. Suddenly, you are making $55,000 a year. You immediately run out and "buy" two new cars and put a down payment on a house.
A year later, you are $200,000 in debt. You will never be able to pay off your debt, because it constantly generates more of itself. you buy everything with credit cards, which increases your debt. You life in a nice house and drive a nice car, but life just sucks. You are constantly worried that the economy will turn sour, that you will lose your job and suddenly find yourself back in the trailer with no car and a mountain of debt.
Congratulations. You are Middle Class.
Consider the alternative:
...One day, one of you gets a promotion at work. Suddenly, you are making $55,000 a year. You put it in the bank. Six years later, you will have enough money to buy a nice house and a slightly nicer car. If the economy goes sour, you could live on your savings. You are happy. By most peoples' standards, you are rich.
This is what I meant by "Never become middle class." In other words, always live below your means.