How To Be Rich Without Being Rich

The wealth gap is a serious issue but it can be overcome.

Marketwatch had an article titled Why only a tiny percentage of Americans benefit from Dow 25,000. It has a lot of charts that show how bad the wealth gap is in the US and the trends in place that show it getting worse. I am a huge believer that the wealth gap is a very serious problem that makes the country far worse off. The top 0.10% don't spend enough to prop up the economy. Economic health depends on a much broader consumption base. To be clear, I am not making an argument for raising taxes or any other form of redistribution for several reasons including it would be an effective distribution of capital. I don't have the answers for how to fix the problem from the top down but from the bottom up we all have the ability to help ourselves.

The way I have long defined being wealthy has been to say that if you make enough to pay your bills, save some money and have a little left over for some fun, then you're doing better than most people, you are arguably financially independent even if not wealthy in the traditional sense. This definition has no income level associated with it. It does have several behaviors associated with it though.

The simplest behavior is the ability to live below your means. Every knows they should do this but it is easier said than done and not everything is in our control. Living in less house than you can afford is within everyone's ability. Driving a car for as long as possible before replacing it is within everyone's ability. You just need to want to do those things.

The money saved does a couple of things. Aside from obvious of being able to save a little more or have a little more left over for fun, in the context of the Taleb posts from earlier in the week, having a lower fixed monthly nut to cover makes you more robust in the face of some sort of adverse financial event like a $2000 veterinary surgery.

We have more control over our spending than we do over our income and investment returns but you can do things that help income and returns. In terms of income, something I write about is monetizing a hobby for supplemental income in retirement. This takes a lot of time to cultivate but can make for a more robust (taking yet another page from Taleb) retirement. In terms of investment returns you can't realistically expect to outperform, it might happen but you can't expect it isn't even a requirement for a successful outcome. The biggest thing related to investing might be the simple act of avoiding self-destructive behaviors like selling out after a large decline or making outsized bets that increase your fragility (Taleb). An adequate savings rate, proper asset allocation and the avoidance of self destructive behaviors will get the job done.

There is no short cut for saving money and it is ok if you start late but it would be better if you start early. If you're 50 and don't have any savings then you probably can't retire at 60 but you can accumulate a decent nest egg in 15 or 20 years. Do the math for a Roth contribution, HSA contribution and both partners putting into a 401k. It wouldn't be easy but could easily add up to a couple hundred thousand at 65 or 70.

From there downsizing a paid off house into something like this shipping container home could create a very healthy work around to not being on the right side of the wealth gap.

Living cheap but still having fun, tightening the belt enough to start saving some money and being willing to downsize later in life if you need to is an accessible path to being financially independent which is arguably the same as being wealthy.