Right now $10 to $15 per hour is a common wage, but it is hardly sufficient for a family. After taxes, the worker brings home about $1,900 per month. Mom works at the neighborhood restaurant, she makes about $1,200 per month after taxes, while they raise three children. After they pay their bills, there is little money leftover. They are working for poverty wages. A living wage is $15 per hour. It's hard to get ahead, even with both incomes, $3,100 take home per month isn't much for a family of five.
Anytime people in poverty do get some money, it is hard for them to hold onto it. They are so used to spending every paycheck. But if perhaps they get a settlement like $50,000 from a wrongful injury lawsuit, they quickly find ways to spend the money. I know one person who started spending a promised $15,000 back pay settlement before he even got the money, he had already racked up $6,000 on his credit cards, buying stuff like a television, stereo, speakers and movies and CDs. When the $15,000 arrived, he paid off his credit card, and then quickly spent the remaining $9,000. It was all gone within a few months.
Institutional poverty is still with us in America. Three million slaves became "free" after the Emancipation Proclamation, but were kept in shackles through laws designed to keep them in prison, and separated from whites. Plessy vs. Ferguson in 1896 upheld the racial segregation laws for public facilities under the doctrine of "separate but equal." It was only in 1954 that Brown vs Board of Education overturned the separate but equal clause. So think about it. Blacks didn't have wealth that was passed down from generation to generation. Grandpa was poor, Dad was poor and Son is going to be poor too. It's only been in the last 50 or 60 years that blacks have been able to build up wealth and pass it down to their children.
Meanwhile there are multiple thousands of white families who have had generations of wealth passed down to them. A good example is the Forbes family. John Murray Forbes was so wealthy in 1850 that he was able to buy an island in Cape Cod. That island, Naushon, is still in the Forbes family, it's probably worth billions of dollars. It's a private island in trust for the benefit of the Forbes family and its heirs. So the Forbes family has enjoyed generations of wealth that goes back over 150 years.
Wealth is so prized in America that anyone with that sort of pedigree can get into the best schools and land the best jobs and make the most money. No wonder Goldman Sachs is full of rich kids who went to Harvard.
Escaping poverty
Oprah Winfrey once tried an experiment to help the poor. Oprah said she would finance a program to move 100 families out of public housing, off public aid and into better lives, but only five families participated in the program. The experiment taught her some lessons. "At its most basic, the lesson of Families for a Better Life may be that the lives of the poor are so chaotic and infused with a 'mind frame of entitlement' that they defy even programs specifically designed to overcome these obstacles," The Chicago Tribune reported.
The crisis, paycheck-to-paycheck lifestyle is a soap opera that requires constant attention; the car breaks down, Mom suffers from back problems from standing all night at the bar, Dad is a Manic Depressive Alcoholic, he should be taking his medication and not drinking so much. A teen-age son is in trouble for skipping school and smoking pot. Mom flirts with another Man at the bar, Dad is jealous. They drink late into the night, fighting and yelling, scaring the children, who wonder if Dad is going to move out. Talk about a house of pain.
Divorce is another cause of poverty. Two incomes in one household are better than one income; two working together can do great things, but divide the family into two houses, you have twice the utility bills, twice the rent, twice the expenses of maintaining two homes.
How do you rise above that? How does one break free from the chaos? Some say religion is the answer, others say the answer is found in the 12 Step AA or NA program. God and money Evangelist Dave Ramsey has programs designed to help people pay down debt and get ahead financially. He talks about people being "slaves" to bankers, always having to pay debts to the banks. Stop being a slave, he says, pay off your debts and free yourselves from entrapment.
Financial advisors will tell you to create a budget that not only pays your bills, but also sets aside money for emergency savings and retirement. All of this advice is readily available, even free on the Internet. There are thousands of self-help books like "Think and Grow Rich" by Napoleon Hill.
My advisor in college said, "Get your social life in order, so you can focus on your profession." That was great advice.
I like rags-to riches-stories. GirlBoss is one of my favorites. Sophia Amoruso was a punk rocker who lived off the grid after high school, she had a job that paid poverty wages, while pursuing her fashion hobby, buying on the cheap retro outfits at estate sales and then reselling them on eBay. Her Nasty Gal business took off. For her Web site, she used her photographic eye to create images that were attractive to young girls. Customers paid a premium for her retro-looking clothes. Because Sophia lived off the grid for so long, she struggled to get credit. At first, banks didn't want to loan her money. So she paid for everything in cash. Eventually she created her own brand of clothing, operating out of a big warehouse in Los Angeles, the business grew to $100 million. A business like this has an 8% to 10% margin, netting about $10 million annually.
More close to home, I know someone who grew up in a small town in the Midwest. His parents were poor, but honest and hard-working. This person, Danny (a real person but I am changing his name to keep him anonymous) entered the military after high school. He married well. His wife encouraged him to continue his education, earn a bachelor's degree and complete officer training school. They raised three children. Danny moved up the ranks in the military. After 24 years, he retired from the military with a pension paying $75,000 annually. He took two years off, then got a similar job as a civilian, making $75,000 annually. So now he makes $150,000 annually. Plus his wife works, making about $30,000 annually. They paid off their debts and plan to retire in a few years. A couple of reasons why Danny was successful: He stayed married, he and his wife worked hard to raise their children. Danny surrounded himself with good mentors. He particularly was fond of his wife's grandfather, who served 20 years in the military, got a pension and then started working again in banking for another 20 years. This grandfather mentored Danny. And Danny listened and applied the knowledge given to him. Danny believes the breakdown of the family is the root of poverty and misery. There is some truth to this.
I know a young talented man who could go far in life, but he is struggling post high school, trying to figure out how to get ahead. He does not want to go to the University of Kansas or Kansas State University because he says he can't afford it. His parents did not go to college. This person, I shall call him Johnny, does not want to work in restaurants because the pay is low and the work is hard. He wants to be a graphic artist. Most employers hire graphic designers with college degrees. I suggested my friend work any job that supplies steady income, save up $1,000 while living at home with your parents. Open a studio in NOTO Arts District for $300 per month, or open a studio in your home. Work part-time at the studio, focusing on solving client's graphic problems. Clients will tell you what THEY want, you do what they want, make them happy, and you will grow your business. Work two jobs, work all the time, when not working the regular paying job, work on the design job. But Johnny didn't seem interested in that plan. He seems to be floundering.
With any business idea, find out if there is a market for your services or product. Do a market survey. Find the biggest problems and solve them. Entrepreneurs get paid well for solving problems.
I worked two jobs for much of my life. One summer in college I had three jobs, as a Daily Nebraskan reporter, a telemarketer and as a line cook at Wendy's. And I took classes in between these jobs. When I finally got a full-time job as reporter at a daily newspaper, I started working on a second job as an investor. Charles Armstrong, an Edward Jones representative from Grand Island, Neb., told me to read everything I could get my hands on about investing. I did. In my spare time, I read Money magazine, Value-Line, and books about Warren Buffett. I opened a brokerage account with $1,000 and started buying stocks. I worked these two jobs for about 20 years before I finally was able to give up the 9-to-5 job and work on my own, operating my own investment portfolio and freelance business from home.
Conclusion
The rags to riches story is a story of hard work, persistence and dedication. It is a story of struggle, learning and great reward. It is also a story of sacrifice, change and adaptation. Don't let history hold you back. To anyone wanting to get ahead, find out what you love to do, figure out a way to make money doing it, and then do it all the time. You will be amazed at how much income you can have with this mindset. Once the income is rolling in, save 10% to 20% of your income, invest it wisely and you have a lot of money over time.
No comments:
Post a Comment