Up until I was 40 years old (I’m 55 now), I floundered financially. I wasn’t a basket case. I was able to pay my bills. But I was using debt to live beyond my means and acquire the superficial symbols of success—a car, a condo, a host of electronic equipment, and a bunch of credit cards to keep the party going whenever my paycheck fell short. In a nutshell, I was the typical American. No emergency fund, no retirement account, and no idea how precarious my situation was.
But then, seemingly overnight, the worm turned. I was no longer living paycheck to paycheck. I was thriving. In fact, by the time I was 45 years old, I was saving over 50% of my gross annual salary.
So what happened? Did the 1% suddenly become more caring? Did corporate America suddenly become less greedy? Did our political class suddenly become less corrupt?
Of course not. If anything, the avarice of our elites grew worse as I advanced from rudimentary financial solvency to full-fledged financial independence.
No, the only thing that changed was me. Around 2002, I stopped being a financial jerk and started embracing the behaviors that are conducive to building wealth. In other words, I kicked my subprime financial culture to the curb and adopted a prime financial culture.
A Prime Financial Culture Defined
Before I note the behaviors associated with my understanding of a prime financial culture, or PFC for short, I need to address two things. First, my PFC is not a proxy for your value as a human being. In other words, you’re not a loser if you fail to embrace all of my PFC behaviors. You’re just not likely to become wealthy. That’s all. Remember: there are more important things than your net worth. Someone who is poor but honorable and kind is way more successful in my book than someone who is rich but deceitful and cruel.
Second, notice how I emphasized “not likely” in the previous paragraph? There are no guarantees when it comes to accumulating wealth. You can fully adopt my PFC and still end up miserable and broke. All my PFC does is shift the odds in your favor. Embrace it, and things will probably end well—financially, at least.
Okay, now that I’ve gotten the necessary housekeeping out of the way, it’s time to see what my PFC thingy is all about. A culture is just a set of behaviors. Follow a culture’s behaviors and you’ve adopted that culture. For example, if you want to embrace the Hippie culture, you wear bell bottoms, travel the country in a van, and listen to Jefferson Airplane. If you want to embrace my PFC, on the other hand, you adhere to the following 9 behaviors.
Work. There’s no substitute for work. It’s the best anti-poverty program ever devised. So work at least 40 hours a week. And when you do work, be earnest, try to do your job well. You might not think so, but eventually your dedication will be rewarded. Employers and customers loathe slackers and love go-getters.
Learn. Always be learning on two fronts. First, figure out how best to serve your fellow man. For many people, this means college. You learn a trade that is highly valued in the labor market (i.e., doctor, lawyer, engineer, etc.). But college isn’t the only route. I have a friend who bought a small bread route right after high school. Within a few years, because of his natural business acumen and his hustle, he was making over $150K a year—delivering bread, for heaven’s sake. Second, learn how to manage your money. Keeping money is just as hard as earning it. Just ask the legion of former millionaires who have found themselves in our bankruptcy courts.
Save. You can’t get wealthy unless you save. Get over your ego and adjust your lifestyle so you’re able to spend less than you earn.
Invest. The best money in the world is money that works for you. Buy stocks and bonds as soon as you can. And keep on buying them. Every year your stocks and bonds will pay you in the form of dividends and, more often than not, capital appreciation. And after several years, as long as you reinvest the dividends and rebalance your portfolio (i.e. buy low, sell high), the amount of money your money will pay you will be nothing short of astounding. Last year, for example, our money paid Mrs. Groovy and me $118K.
Get married and honor your spouse. Life is the ultimate team sport. Think about it. Buying a home, raising a child, paying for your kid’s college, and building a nest egg—these are rather costly endeavors. Wouldn’t it be great if you had a fiercely committed partner to help you with these things? Hello marriage. Of all my PFC behaviors, this is the one that proved to be the most critical to my financial renaissance. In fact, if I hadn’t met Mrs. Groovy, I probably never would have abandoned my paycheck-to-paycheck mentality.
Procreate responsibly. Kids are expensive and time-consuming. So have them mindfully. Ask yourself if you have the financial and emotional wherewithal to nurture and shepherd a newborn child to adulthood. And if the answer’s no, hold off on having a kid. Far too many Americans have fornicated themselves into poverty by having kids too soon.
Protect yourself from the unexpected. Sh*t happens. You may contract a costly ailment. You may run a red light and ruin two cars. And you may come home one day and discover that Mother Nature has opened a can of whoop ass on your house. It’s therefore imperative that you protect your family and your wealth from the fickle finger of fate. And this need becomes more acute as your wealth grows. Get all the applicable insurance protection you need, starting with health insurance.
Imbibe modestly and avoid drugs. It’s hard to excel at work if you’re a drunkard. And I don’t know any crackheads who are financial dynamos. Enough said.
Obey the law. Don’t steal from people, don’t defraud people, and don’t physically assault people. It’s hard to build wealth when you’re sitting in a jail cell.
The Best Part of My Prime Financial Culture
The beauty of my PFC is that it works. What percentage of people would have a lower net worth after embracing my PFC faithfully for 10 years? What about after 20 or 30 years? Sure there would be some. Bad things do happen to good people, after all. But the percentage would be low, especially as the number of years people operated under my PFC grew.
Okay, my PFC is pretty freakin’ groovy. But here’s the best part. IT’S OPEN SOURCE. You don’t need permission from the government to adopt it. Nor do you need permission from your boss, your co-workers, your friends, or your family. All you have to do is dedicate yourself to its 9 behaviors. That’s it. You’re probably doing 3 or 4 PFC behaviors right now anyway. So go all-in and see how your financial life improves.
A few weeks ago, I came across a very interesting post about race and income over at the Financial Samurai. Here are the pertinent statistics that Sam shared with his readers.
Asian median household income: $78,000
White median household income: $62,000
Hispanic median household income: $46,000
Black median household income: $37,000
Now why do you suppose that Asian-Americans have the highest median household income? Is it because of discrimination? Or is it because a higher percentage of Asian-Americans have adopted my PFC than other races?
I firmly believe it’s the latter. And to prove it, here are some statistics that pertain to three crucial PFC behaviors: working, learning, and procreating.
First, let’s look at unemployment.
|Race/Ethnic Group||Unemployment Rate|
|Source: Bureau of Labor Statistics|
Now let’s look at education.
|Race/Ethnic Group||Percentage of 25- to 34-year-olds with at least an associate degree|
|Source: Pew Research|
Finally, let’s look at child rearing.
|Race/Ethnic Group||Percentage of out-of-wedlock births|
|Source: National Review|
Do you notice a pattern here? Our household income statistics line up remarkably well with our proxy statistics for three crucial PFC behaviors. Asian-Americans perform the best, followed by white-, Hispanic-, and black-Americans. If we dug further and investigated statistics for other PFC behaviors—especially saving and lawfulness—we would surely see more of the same. And if we controlled for PFC behaviors, and compared, say, married couples in which both spouses work full-time and have college degrees, we would find that all racial/ethnic groups would have similar household incomes.
Our manipulators in Big Journalism say an existential culture war is being waged on Capitol Hill and in our state capitols. I say bullsh*t. As important as bathroom rights and immigration policy are, the real culture war is being waged in your head. If you succumb to the transient luxuries of a subprime financial culture (i.e, debt, consumerism, sloth, etc.), you will suffer financially in the long run. If you don’t, and decide rather to adopt my prime financial culture, your long-term financial prospects will be pretty damn good.
Okay, groovy freedomists, that’s all I got. What say you? Is my understanding of a prime financial culture packed with a lot of wisdom? Or is it packed with a lot of hooey? Let me know what you think when you get a chance. Peace.