Please! Please! Please!

I have been reading about the disturbing growth in the divide between rich and poor America. It is not only a divide between the important financial indicators (income and net worth). It is also a growing cultural divide. We are living in two different countries. Our children are growing up in two different countries. Charles Hugh Smith in the oftwominds blog uses the Pareto Principle to define the separation between the top 20%, most of these people are the professional and managerial class that does the “heavy lifting” for the top 1% who understand and therefore control a disproportion amount of capital, and the bottom 80%. From Who Rules America by G. William Domhoff. “In the United States, wealth is highly concentrated in a relatively few hands. As of 2007, the top 1% of households (the upper class) owned 34.6% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 50.5%.”

If I could put on a performance like James Brown, the Godfather of Soul, I would be singing, “Please! Please! Please!” Believe me when I say the stuff that I write about in this blog works. It will work for you no matter where you fall along the net worth or income distribution curve. It will work if you are a Christian, a Buddhist, or an atheist.

Spend less than you earn.
Save enough money to handle unexpected expenses.
Stay out of debt.
If you find yourself in debt, get out of debt.
Then start investing your surplus.

It won’t happen in a day, or a month, or even a year. But I promise you, if you keep your hand on the throttle and your eyes on the rail, in a decade you will not believe how far you have traveled.

Charles Hugh Smith observes, “The divide extends to money management: the high-caste class is deeply interested in investments and view high-earning investments as signifiers of status while the working class only see the spectrum of consumption.” If you focus on buying stuff, you will have a low net worth even if you earn a significant income. The number of mc-mansions that have gone into foreclosure in this area are proof of this truth. Likewise, there are examples of families with minimal incomes who have accumulated surprisingly large amounts of money.

An interesting observation Smith and others (including yours truly) have made involves the new media technology. The top 20% own the same smart phones as the bottom 80% but they use them differently. The top 20% use these devices to facilitate their job and to collect information. The 80% are, according to Smith “voracious consumers of all media and entertainment.” They see the constant use of Facebook, text messaging, and the latest films on bootleg DVDs as signifiers of status.

If you don’t like your financial condition, do something about it. Turn off the TV and start reading books by people like Dave Ramsey or Suze Orman, or even the Silver Eagle Experiment. Change your behavior and change your life. You can do it. It will be a blessing to you, your children, and to your children’s children.

Background material from Wikipedia:

“The Pareto principle (also known as the 80–20 rule, the law of the vital few, and the principle of factor sparsity) states that, for many events, roughly 80% of the effects come from 20% of the causes.
Business-management consultant Joseph M. Juran suggested the principle and named it after Italian economist Vilfredo Pareto, who observed in 1906 that 80% of the land in Italy was owned by 20% of the population; he developed the principle by observing that 20% of the pea pods in his garden contained 80% of the peas.”