By David Joel Miller.
In the wealthiest country on earth, most Americans are poor.
What does it take to become a wealthy person? Getting into that top one percent may be difficult but moving up wealth ladder takes a whole lot less than you might think.
Poor may be easier to define than wealthy. The poor can’t afford much of anything. By most economic measures the majority of Americans are poor. I will emphasize Americans in this post because most of the rest of the world thinks of us as wealthy, we know better.
Two-thirds of all Americans live paycheck to paycheck.
Most of us are one paycheck away from homelessness. The only thing saving a lot of us is the slow speed of eviction and foreclosure.
Absolutely having an income is important. We will return again later to the theme of the connection between having a job, any job, and having hope and good mental health. But once you have that income coming in, what will it take to start moving up into the ranks of the “wealthy.” Probably way less than you think.
Over one-fourth of Americans have no savings account. Open a savings account of any amount and you move into the upper 75 % of all Americans in wealth. Better open that account with a credit union. In what I see as amazing cynicism most U. S. banks will charge you so much for “maintaining an account” those fees will drain the account dry in a matter of months.
Want to do better than that? Let’s say you want to join the upper 50% wealthiest Americans, you need to reach a balance in that savings account of just $500. That’s right folks; to enter the ranks of the wealthiest half of all Americans you need just $500 in savings.
You are saying that it must be more complicated than that. Well yes, there is a little catch. You can’t count yourself wealthy if you don’t pay your bills to collect up that saving account balance. But don’t worry about that one too much. Turns out most Americans have bills that exceed their savings account balance. So yes even with balances on your credit cards you can make the 50 % most wealthy Americans list with just $500 in savings.
Want to bypass all that middle of the road stuff and make the upper crust? The wealthiest one-third is your goal? The amount you need in Savings will need to reach the astronomical figure of $1,000.
This is mind-boggling. Most of us will spend thousands on a big screen or a new computer but can “spend” $1,000 by placing it in a savings account for later use. How much is peace of mind worth? If you lose just one night’s sleep worrying about paying bills having that $1,000 cushion will be worth the effort to save it up.
Unless, big warning here, if you are one of those people who the minute you get some money in the bank you increase your spending to use that money up. To get into the top one-third in wealth is a lot easier than to stay there.
What about credit cards?
We need to talk about the average American now, not the upper or lower anything. Calling anyone average is a stretch, especially when we are talking about money. The average family had 2.3 children at one point. No one has point anything kids. You either have two or three or you belong in an institution for the criminally insane.
Take one person walking down Wall Street; he has one hundred million dollars in the bank. Now average his bank balance with the nine homeless people in that Occupy encampment. What is the result? The AVERAGE bank balance will be ten million dollars. No one in this example has that amount.
This trying to average Billionaires and people making minimum wage is one reason Washington keeps getting us into trouble. If you take away everything the Billionaires have and leave them homeless you still won’t get enough to make the homeless into millionaires. On the other hand, if the Billionaires don’t kick in and kick in good there will be no one to buy from their companies and they will not feel safe walking the streets. Trickle-down economics only works when the flow rate increases way beyond a trickle. But I digress.
How do credit cards figure into this becoming a wealthy person?
Credit cards have their place. I am not urging you to return to the depression era economics and go completely without the existence of credit. I keep some in case my car breaks down in the middle of the desert and I need to get it repaired to get out of there. I do not move to the desert and try to live by using my card instead of working.
The way some card companies market their products is the equivalent of that chocolate cake on the healthy eating list. Sympathy for those card companies is like caring for sharks by keeping some in the community pool. I am all for conservation but it does not include a shark in my pool thank you very much.
So what is the relationship between being a wealthy American and credit cards? Wealthy people do not carry balances on credit cards. If they have them and use them they pay them off as quickly as possible.
This keeps most Americans out of the “Wealthy” club. The “Average American” has $3,800 in their bank account but they have $2,200 on their credit card. If they were to pay that credit card off there would not be even one month’s living expenses left for that “average” American.
The net result is that they will end up using that card again. They get to pay and pay that balance over and over and still never get out of debt.
Want to be a wealthy American no matter how much you make? Save up some money in an emergency savings account, pay off those credit cards and then scale back your spending to match your income.
You can’t afford the bare necessities you say? We need to talk about the difference between necessities and luxuries, between wants and needs. But this post has run over so I will save that for another time.
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For more about David Joel Miller and my work in the areas of mental health, substance abuse and Co-occurring disorders see the about the author page. For information about my other writing work beyond this blog check out my Google+ page or the Facebook author’s page, up under David Joel Miller. Posts to the “books, trainings, and classes” category will tell you about those activities. If you are in the Fresno California area, information about my private practice is at counselorfresno.com. A list of books I have read and can recommend is over at Recommended Books