On Personal Finance sites, we tend to get bogged down in the details of the drive for financial independence. We do the boring stuff most people don't bother doing - reading account agreements, pouring through investing prospect, and strategizing the best combination of credit cards needed to get the most cash back on certain purchases. Worthy undertakings all, yet sometimes we over-complicate a simple matter - there is a very basic equation to success: literally, there may just be three rules for financial success.
The Abridged Version of Success
On the 5th of June, Ron Haskins of the Center on Children and Families at the Brookings Institute gave testimony to the US Senate's Committee on Finance about poverty. His testimony generally highlighted trends of poverty since the late 50s and delved into some of the details of some ways which poverty has been dealt with in the past. Now, of course, any speech about poverty includes some juicy statistics which you can exploit to avoid the state - and this speech was no exception.
"... young people can virtually assure that they and their families will avoid poverty if they follow three elementary rules for success – complete at least a high school education, work full time, and wait until age 21 and get married before having a baby. " - Ron Haskins Testimony to Senate Committee of Finance, June 5, 2012
Tents in Mumbai, India
The Three Rules for Financial Success: Education, Dedication and Abstinence?
Well, when you put it like that it sounds pretty boring...
Regardless of how people go about avoiding having babies, finishing their high school education and working - results are similar across the board. In fact, people who follow all three rules, Ron continued, had only a 2 percent chance of being in poverty. He also stated they have a 72% chance of joining the (defined as $55,000+ annual) middle class. Not bad odds!
As for people who broke all three rules? Their 'middle class odds' dropped to 4%, while their odds of poverty shot up to 77%.
Simple Formulas for Success...
Now, I know that we don't have many high schoolers or even people younger than 21 on this site - but one of those variables can be controlled (working full time). As for people you share the simple formula with? The younger you can impress on them the importance of those three things... the better. Remember - there are always young folks (and they keep being produced). Teach them the easiest ways to success, and prevent them from throwing up barriers in their path.
What do you think about the three rules for financial success? Any stories or anecdotes you want to share on the topic? If you want to go deeper, ave you read our four pillars of personal finance?
