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How To Get Rich, Slowly
It seems like when anyone wins the Megabucks, they squander the winnings and their life spirals out of control. But these bad examples haven’t stopped people from playing. I always think I’d be the exception to this rule—but it’s safe to assume that’s what those winners also thought.
Of course, since I’ve never bought a lotto ticket, I likely won’t win, and we’ll never get to find out that answer.
We all do want to get rich, or at least we all prefer more money to less, and we’d rather have money now rather than later. So, what insights does economics give about being rich? Three thoughts:
1. It isn’t really about money.
Well, not solely about money. Economists are quick to point out the many forms of wealth: besides shiny new cars, bigger McMansions (now, apparently, modern farmhouse a la Chip and Joanna Gaines), and fancier designer clothes, we are quick to remind people that wealth can be a host of non-monetary experiences. We value playing with a child or grandchild, a spiritual moment, a long hug, a good walk, a non-eventful doctor visit, or a restful nap in a hammock. The German expression for carefree—"Leben wie Gott,” or “Like God in France,” reminds us that sipping a cappuccino on a sunny day is pretty much priceless. Though it seems to taste better in a Parisian cafe.
2. There are bad sorts of rich and bad sorts of poverty.
The pressure and meaninglessness of conspicuous consumption is a real danger for people who are earning any amount of money. And though “happiness” is difficult to measure, that hasn’t stopped economists from trying to measure it, and they’ve found that (surprise, surprise) money makes you happier. Though earning any more income than, say, $75,000/year still increases your happiness—perhaps $100,000, adjusted for inflation—there are diminishing returns. Your second Rolex isn’t as amazing as the first, and it’s a bit gauche to wear them both at the same time.
One the other hand, grinding poverty is demeaning, and can be hopeless. But…
3. Remember, the poorest people in America today live a better material life than nearly everyone else during the last 10,000 years of human history.
Fretting over “first world problems” like a slow download time for your latest entertainment is self-evidently silly. There’s some awesome news here: the percentage of people who are poor in the world has dropped precipitously in the past century. Even better: despite growing world population, the actual number of poor people is also dropping, and has dropped by billions.
So, yes: material wealth isn’t everything, but it is something. And what do economists tell us about getting rich? What follows are some small nuggets of advice that economists give freely:
==If you want to be rich, live like a poor person; if you want to be poor, live like a rich person.
==A corollary: practice extravert frugality, punctuated by random extravagance. Being a skinflint who exits this world in a dingy apartment with millions of dollars stashed in assorted hiding spots isn’t anyone’s idea of a good life. As we accumulate wealth, wise and extravagant sharing is good for your soul, and good for your neighbors.
==Then again, if you spend your money investing in your (or your kids’) skills, that will pay dividends. Investing in what economists term “human capital” is the surest way to get rich, as countless immigrants to America have shown for centuries.
==Avoid profligate spending on depreciating assets, and really, really, try not to borrow to pay for those! That means cars, vacations, furniture; pretty much anything except a home or an education.
Finally: remember your goal. Life is not a race to outpace…but a steady march to virtuous goals. A good life involves money, but a good life isn’t merely about money.
