What’s your favorite excuse for not having $7 million? Let’s make it easier: what’s your excuse for not having $1 million?
It will probably be something to do with lack of luck, opportunity, income, and so on …
And, that may all even be true (but, if you keep reading this blog, you’ll find that all changes pretty quickly).
But, tell me what excuse anybody has for not being able to retire with a paltry $1 million in 20 to 40 years time?
Take a look at the chart above: people on low incomes are spending nearly twice as much on entertainment as they spend on saving for retirement!
Now look at the same comparison for other income groups:
That ‘saving for retirement’ ratio reverses as income increases …
But, take a look at those earning high incomes of $150,000 or more: they spend nearly 3 times as much saving for retirement as they spend on entertainment.
So, let me pose a question:
Was it their high income which allowed them the ‘luxury’ of putting away so much for their retirement?
Or, was it the same mindset that compelled them to begin thinking about their financial future that set them up to:
1. Increase their income so greatly, AND
2. Save so much?
I know what I think. How about you?
Andrian-can you please let me know where you got the data used in the chars? Thanks.
@ Bob – Here it is (or you can click on the large image in the post):
I followed the website link that you posted for the infograph. Interestingly there is no percent error reported for the numbers. Lets assume 3% error and a lot of those categorizes start to pretty much equal out where there is no real difference (housing, restaurants, cloths and food, entertainment etc.) However let’s not lose focus that when you earn more the percent spent GETS YOU MORE and in some cases a LOT more. The biggest difference that I see is in the categories education and saving for retirement. That makes sense to me since the majority of people only pulling in about 20k or less a year tend to not be educated (probably a generalization but likely true). Therefore they do not put much emphasis on education nor on the future i.e. retirement. I often work around people that represent the 20k income bracket. I can tell you first hand that they are more interested in making ends meet and enjoying the little of what they have. Life is tough in that income bracket.
@ Michael – Thanks for that. It’s interesting that, as you get higher on the income scale, you can spend a LOT more on entertainment (as a %) and still max out on retirement.
Step 1 seems to be: increase your income!
Sure, we all want to increase our income but if you’ve ever read “The Millionaire Next Door” they make an interesting comparison of income and net worth. I think the poor get poorer because the poor is always trying to mimic those that are better off. The easiest way to mimic them (it’s not their investment advice) is to buy the big screen TVs and newest hybrid out at the time. Just always remember to live within your means and “keepin’ up with the Jones'” isn’t all it’s cut out to be.
“I think the poor get poorer because the poor is always trying to mimic those that are better off.”
@ Chris – I think so 🙁