How The 99% Can Make It

by Jon Dulin

99%This post is not going to get political and debate the Occupy Wall Street movement. Rather it is going to look at the core message and how the 99% can better themselves.

Understanding the 99%

At the heart of the movement, the 99% are upset (or mad, depending on how you look at it) at the 1% for making most of the money. My question is this: Who does the 99% work for? Obviously most will say, “for the big corporations” or “for the 1%”. While this is technically true, everyone really works for themselves.

You work to better your life. When you get a paycheck, that money is yours. You choose to spend it as you see fit. Everyone uses a portion of their paycheck to pay someone else, either through credit card debt, a mortgage, gas, groceries, eating out, etc. You are taking your money and paying someone else for a service or a good. There is nothing wrong with this, as some of it has to be done in order to survive. But what the majority of the 99% don’t do is pay themselves for working. They are debtors, not investors.

Pay Yourself First

It has been proven time and time again that to find financial freedom you have to pay yourself first. You don’t get a paycheck, pay all of you monthly expenses and then save what is left over. Sadly, this is what most people do. At the end of the month, these people don’t have any money to save. Many spend more than they make and put the difference on their credit card to get by. You should take your paycheck, save 10-20% (studies show that the average millionaire saves at least 15%), and then pay your monthly expenses.

Some will read that and argue that if they were to do that, they would not have enough money to go out to eat, buy clothes, etc. If this is the case, then unfortunately you cannot afford to do these things. You will need to stay in and find something else for entertainment. You will need to make sacrifices.

Aside from those that inherited their wealth (and less than 20% have inherited their wealth), millionaires are self-made. How did they do this? They paid themselves first. That is how they became the 1%. As you accumulate money, the rate at which it grows (or compounds) accelerates. (Play with this savings growth calculator to see for yourself. To read more about the 1%, read my post on interviews with the 1%.

Below are three amounts of money saved (left) and the interest earned in a given year if that amount were to grow at 3% (right):

Amount Saved      Interest Earned

$5,000                            $150
$50,000                         $1,500
$500,000                      $15,000

Notice that the more you have, the faster it grows. This is why most of the income the 1% earns each year is investment income. When you invest a large amount of money, it is going to grow into larger amounts of money. And don’t think for a minute you need a professional money manager to invest your money. Betterment will help you to control the things you can control when investing so that your chances of success are increased.

So for all of the 99% that want to get ahead, here is how you do it:

When you get your next paycheck, take the amount of the check and multiply it by 10% and save that amount in a savings account. (If your check is for $1,000, take 1,000 x .10 and save $100). You now live off of the remaining $900. (This 10% is in addition to any amount you are saving in your 401(k) plan at work.) If you cannot save 10%, it is time to make some sacrifices. Cut off your cable or choose a more basic plan. Change to a pre-paid cell phone. Find ways to cut your expenses that allow you to save a minimum 15-20% each month. If you somehow cannot cut your expenses any less, you need to get a higher income through a raise, a better paying job, a second job, or start your own business.

Once you start saving, you need to invest it in the stock market. Putting the money under mattress or earning 0.05% from your bank isn’t going to cut it, let alone keep up with inflation. I know the stock market can feel intimidating at times, but if you focus on the long-term and ignore the short-term noise, you will be a successful investor.

You can read this post on how to invest if you are scared of the stock market and this post on how to become a stock market millionaire. You can also read my eBook, 7 Investing Steps That Will Make You Wealthy. Additionally, you should read my post on retiring early. It has a ton of useful tips to make sure you get your finances in order so that you can retire, regardless of age.

As time goes by and you save 10% and eventually more, and you invest in the stock market, you will gain financial freedom. It won’t be easy. You will have to make sacrifices and choices. Everyone does. Even the 1% did at some point. You just never hear about it or see it. If you really want financial freedom, you will find a way to attain it.

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{ 2 comments… read them below or add one }

Marissa June 6, 2012 at 3:06 pm

This is a good advice. My family gives 10% of our income to our church. I think it would be a good practice to keep another 10% for our savings and live off on the rest.
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Charlotte June 17, 2012 at 1:44 am

“How did they do this? They paid themselves first. That is how they became the 1%.”

I love this post. I think it is super fascinating to look at the top 1% if you’re interested in saving and getting on a good financial path. Even if you aren’t chasing money to be insanely rich, its interesting that most millionaires get that way by driving old cars, living in relatively small houses, and of course paying themselves first–saving money and building a nest egg instead of blowing it all (a concept discussed heavily in the Millionaire’s Next Door book).

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