Jason Flurry, CFP
How to reduce the income gap – or at least take advantage of it
Learn the principles that create financial inequality and use them to powerfully improve your financial situation
A recent study showed the gulf between the richest 1 percent and the rest of America is the widest it's been since the Roaring '20s.
The very wealthiest Americans earned more than 19 percent of the country's household income last year — their biggest share since 1928, the year before the stock market crash. And the top 10 percent captured a record 48.2 percent of total earnings last year.
In a report that accompanied the new analysis the researchers wrote that these outliers are not predominantly elites who enjoy lives of leisure on inherited wealth. America's top earners today tend to be highly paid executives or entrepreneurs – in other words, “the working rich." Our clients definitely fall into that category because almost all of them have sacrificed a lot and made some wise strategic decisions to get to where they are financially. Our job is to help them stay there and build on the success they’ve already achieved while avoiding mistakes that could cost them dearly.
Is it fair? One interesting thing I noted in the report was when they said, “We need to decide as a society whether this increase in income inequality is efficient and acceptable.”
What do you think?
In my opinion it is. In fact, I’m of the mindset that life doesn’t care who wins or loses and money doesn’t care who holds or spends it. These factors of wealth have to be brought in, just like a ship being led into the harbor. People need to have a carefully charted course to reach their own wealth and income goals. They also need to possess the courage and determination to pursue those goals relentlessly. The natural consequence of that type of focused behavior greatly increases their chances for success, and ultimately their odds of experiencing extraordinary income and wealth go up significantly too.
We try to help clients succeed and/or remain successful by educating them and increasing their financial literacy. We explain to them how money moves - which seems simple, but sadly most people have never through about it as it pertains to their own personal level of income or wealth. In order to become wealthy, you need to understand how money moves from person to person and place to place. If what they’re doing for income or growth in their investment portfolio doesn’t correlate with how money moves, they have to make some changes.
It would be great if simply pursuing our passions carried with it the promise of riches, but there are a lot more starving artists than there are senior corporate executives. You have to use your time and talents to provide value, continually increase your skill set, and own things that are in demand so that money will move in your direction. The rich know and understand how money moves and if you want to become wealthy, you have to know and understand why money moves from person to person and place to place too.
Use wealth magnets to your advantage Once you understand how money moves, you also need to put what we would call “wealth magnets” in place so that money is attracted to you. For example, you need to put a magnet in place that addresses your attitude towards money so that you aren’t self-sabotaging yourself. For example, being generous with your money often has a direct correlation to how much of it you get to use along the way. The more you give the more you tend to get so that you can give even more…and so on it goes. Naturally, you’ll get to enjoy some of it yourself in the process, but the real joy in using generosity as a wealth magnet is the satisfaction you get from blessing others.
If you’re self-employed, you need to have strategies for producing effective marketing, advertising, sales, and so forth that will attract money to your business, not repel it. Find ways to implement wealth magnets in every area of your life, or at least do your best to get close to them in other’s lives whenever possible, so you can feel the pull they have on wealth. Maybe some of it will stick to you too!
Skills and tools vs. hope Everyone needs to acquire the right skills and tools to reach the level of affluence he or she desires. One of the biggest things to understand about wealth is that it has nothing to do with your chosen profession…whether you are an eye doctor, a candlestick maker, owner of an auto-repair shop, a cleaning person, a chiropractor, etc. Wealth doesn’t discriminate by industry nor is it related to genetics or to the economy. There are geniuses who are broke and many “not so smart” people who are insanely wealthy. Plus, you can find many examples of millionaires, multi-millionaires and even billionaires who made their fortune from scratch during recessions or The Great Depression, so timing is not a barrier to becoming wealthy either.
To make five figures a year takes a different skill set than it does to make six figures a year. And it takes different tactics to make seven figures than it does to make six. So, to move up the income pyramid, you simply need to acquire the skill set that corresponds with where you want to go. You can’t wish on a star, religiously follow rich people on social media, and simply hope that money comes to you because you think about it all the time. Hope is not a plan!
Everyone you respect who has a lot of money most likely got it through hard work and tireless dedication. There’s no other way around it, and in that way building wealth is a lot like building muscle. You can read about push-ups, think about push-ups, talk about push-ups, and watch others do push-ups - but until you get down there and do them yourself, you’re never going to grow. It’s the same with money. You have to implement the right principles consistently over time to get the results you want.
Systems are everything Putting systems in place for the areas of your life that produce income and wealth, as well as those that avoid debt, is one of the most valuable ways you can spend your time. Systems can produce results for you around the clock automatically and give you reliable, predictable results. They also allow you to grow your wealth and income level even when you step away from them. You leverage your impact in the wealth creation game by having good systems in place and then following them consistently. We do this through regular follow up sessions and disciplined rebalancing within our client’s investment portfolios. By default, we buy low and sell high more often and proactively monitor our progress toward reaching the goals they’ve set, making adjustments as needed to stay on track.
By focusing on improving your financial education, developing good reliable systems, and taking action to improve your skills and understanding of how to attract money, you can go from being a dud to a dude in a surprisingly short amount of time. Having a process that is based on principles and a system to implement that process consistently will help you use the percentages to your advantage too. The same percentage of growth on a large amount of income or wealth will exponentially leave someone at a lower level in the dust when comparing the bottom line numbers in dollars. Simple math prevents them from ever catching up unless they follow some of the steps I mentioned here and qualify themselves to receive more income or wealth.
It can be frustrating to see research reports like this come out if you’re on the wrong end of the spectrum. But, rather than letting it upset you, let it motivate you to join the ranks of the wealthy. Improving your life is a combination of choice and learning the truth about how money operates. And the good news is anyone can do it! All you need is a well-designed plan, a determination to see it through, and the courage to take action now to close the income gap and reach all of your goals with confidence and certainty.