Why Most People Won’t Be Wealthy

It’s a tough reality, but most people will not become wealthy. This largely stems from the fact that most people follow societal norms and remain average. If you aim for average results, just do what everyone else does. However, if you want to be above average, simply observe the masses and do the opposite.

Being average isn’t necessarily bad, but it doesn’t provide an edge in life. The average annual salary in Australia is about $98,000, and according to Statista, most families living paycheck to paycheck fall below this amount.

The lower your income, the more likely you are to struggle financially. Conversely, the higher your income above $100,000, the less likely you are to live paycheck to paycheck. Yet, even among the top 1% earning $200,000 or more, 6.3% still struggle to make ends meet.

This highlights that while your income significantly impacts your financial situation, how you manage your money is equally crucial. This brings us to why most people will never be wealthy. Inability to earn a higher income plays a major role, but it isn’t the only factor.

Consider the story of Ronald Read, a man who remained virtually unknown until his death. To those who knew him, his life seemed unremarkable. He worked as a car mechanic for 25 years and spent another 17 years sweeping floors at JCPenney.

Yet, his passing at age 92 drew international attention. Out of the 2.9 million Americans who died in 2014, fewer than 4,000 had a net worth exceeding $8 million. Ronald Read was one of those few.

How Ronald Read achieved this is incredible and sets an example that doing just a bit more than average can lead to significant success.

Living Below Your Means Is Key To Being Wealthy

In his will, Ronald Read bequeathed $2 million to his stepchildren and generously donated the remaining $6 million to his local hospital and library. Many, including those closest to him, were in disbelief over how he accumulated such wealth.

The truth is, Ronald Read had no inheritance, lottery wins, or risky bets. He simply saved diligently and invested in blue-chip stocks. At 38, he bought a modest two-bedroom home for $12,000 and lived there for the rest of his life.

Contrast this with Richard Fuscone, an accomplished finance executive at Merrill Lynch, who retired at 40 after a successful career. Fuscone lived a lifestyle opposite to Ronald Read, yet he too made headlines.

In the mid-2000s, Fuscone took on substantial debt to expand his already sizable home, which boasted 11 bathrooms, two elevators, two pools, and seven garages.

However, the 2008 financial crisis dealt a devastating blow to Fuscone. His highly leveraged assets and lack of liquidity forced him to tell the bankruptcy judge that he had no income. While Ronald Read left his fortune to charity five months prior, Fuscone sold his home in foreclosure for 75% less than its estimated worth.

Most people increase their spending as their income rises, but it takes an above-average person to keep spending the same as their income grows. This discipline is key to becoming wealthy.

Failure To Plan The Future

Most people overestimate what they can achieve in the short term and underestimate their long-term potential. Becoming wealthy requires a future-focused mindset, but the average person rarely plans that far ahead.

Ask a 20-year-old about their retirement plans, and they’ll likely be puzzled. Few of us think about where we’ll be in 10, 20, or 30 years.

At a young age, who considers retirement? It’s a time for living in the moment, with retirement seen as something distant, 40 years down the road. However, the truth about growing wealthy lies in starting young and letting investments mature.

Most people take life one step at a time and only begin to think about retirement as they get older. By then, they often regret not starting earlier.

New research reveals that 45 percent of Australians have less than $1,000 in their bank accounts, equating to approximately 9.4 million individuals. Additionally, 20 percent of Australians admit to having no savings at all. The study shows the average bank balance for those with little savings is $210.

High inflation and rising living costs are certainly factors, but the fact that so many Australians have no savings buffer is concerning. It highlights the average person’s failure to plan for the future until it’s too late. The bleak truth is that many Australians either cannot save or do not prioritize saving.

To become wealthy, one must save, invest, and let compound interest work its magic. Compound interest is most effective when given time to grow, which requires a long-term perspective. In a previous post, I discussed the benefits of reaching an investment portfolio of $100,000.

The Fear Of Being Wealthy

It might sound surprising, but I believe many people fear becoming wealthy, or rather, they fear taking the first step toward wealth.

Financial literacy isn’t discussed as much as it should be. I was fortunate enough to have parents who taught me the importance of saving money. However, their advice stopped there. Growing up, I got good at setting aside a large portion of my salary, turning saving into a game of collecting dollars.

That money, however, sat in a savings account earning minimal interest. Considering inflation, it actually lost value over time. In my early 20s, I wanted to invest in shares but never did because of one simple reason: fear. The fear of the unknown and the fear of losing my hard-earned money held me back.

When we first start working, our employers give us forms to fill out for superannuation, usually offering conservative, balanced, and aggressive options.

Few people choose the aggressive option, even though it tends to yield better results over the long term. Aggressive simply means that most of your super is invested in more volatile assets like shares.

The truth many don’t admit is that we fear change and prefer to stay complacent because it feels safe and comfortable. We continue with our current financial habits, even if they aren’t optimal.

Challenging myself and stepping into difficult environments allowed me to start a business and take that first step into investing. Now, I wish I had started sooner. Overcoming the fear of change and making those first moves are essential steps toward becoming wealthy.

Key Takeaways

• Ronald Read’s disciplined saving and investing led to significant wealth, contrasting sharply with Richard Fuscone’s financial ruin despite higher earnings. Consistent spending habits, regardless of income, are crucial for becoming wealthy.
• Most people underestimate their long-term potential and fail to plan ahead. Becoming wealthy requires starting young, saving diligently, and letting compound interest work over time.
• The fear of taking the first step toward wealth is keeping most people back. Overcoming this fear and embracing change is essential for financial growth and becoming wealthy.

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