There are a lot of people who are successful by accident — they are born into money; they marry into money, etc. Alternatively, most people who make money the old fashioned way, tend to have all of the following traits.
#1 Earn a Degree in a Marketable Field
College is expensive, the average four-year undergraduate degree will run you $75,772 to $169,676.
The average sticker price, with room and board included, for undergraduate students attending a four-year college or university in their home state was $18,943. Out-of-state students at those schools paid, on average, $32,762. The cost to attend a private, four-year nonprofit college: $42,419, on average, including housing and meal plan.
If you are going to invest six figures on your college education, you should probably invest that money in a degree program that will pay off handsomely. People who graduate with degrees in subjects like petroleum engineering and pharmaceutical sciences earn $3.4 million more in their lifetimes than those who get degrees in low-paying fields like early childhood education, studio art and social work; over a 40-year career, that’s an average of $85,000 per year difference!
|Rank||Career||Starting Salary||Mid-career Salary|
|29||Supply Chain Management||54,800||83,600|
|26||Civil & Environmental Engineering||55,900||91,800|
|25||Management Information Systems||56,300||95,500|
|24||Mechanical Engineering Technology||56,600||85,400|
|23||Business & Information Technology||56,900||99,100|
|19||Electrical Engineering Technology||58,900||88,200|
|17||Business Information Systems||59,800||85,100|
|11||Computer Science & Mathematics||63,200||101,400|
|10||Materials Science & Engineering||64,000||105,100|
|9||Electronics & Communications Engineering||64,100||113,200|
|6||Electrical & Computer Engineering||66,500||113,000|
|5||Computer Science & Engineering||66,700||112,600|
I know it’s an awful lot of numbers, but did anything jump out at you? Did you see the words “computer science” or “engineering” sprinkled liberally throughout the list of highest paying jobs?
The vast majority of this list is made up of STEM jobs. STEM is an acronym for:
Earlier this year, the White House announced a plan to use $100 million in H-1B fees to help train people for technology jobs. To make its case for this new program, it said there were 545,000 “unfilled jobs” in information technology. Here’s some food for though:
- In 2010, there were 7.6 million STEM workers in the United States, representing about 1 in 18 workers.
- STEM occupations are projected to grow by 17% each year through 2018, compared to 9.8% growth for non-STEM jobs
- STEM workers command higher wages, earning 26 percent more than their non-STEM counterparts.
- More than 2/3 of STEM workers have at least a college degree, compared to less than 1/3 of non-STEM workers.
- STEM degree holders enjoy higher earnings, regardless of whether they work in STEM or non-STEM occupations.
If you are going to invest in a college degree, you should try get a STEM degree. Nothing against liberal arts, but you don’t have to go to college to learn about 18th century French poetry; there’s lot’s of free information available on the internet. If you haven’t selected a college major yet, consider a STEM program. If you have already graduated from college, you could always go back; it’s never too late. If you have kids, try to steer them in the STEM direction.
#2 Avoid Consumer Debt
This is the biggest issue for most people. The temptations to buy the latest products are everywhere; you need to have the latest cell phone, you need to have the latest and largest television, you need to have the latest fashions. None of these are needs, they are wants and desires, mainly driven by advertising and peer pressure.
People buy more than they can afford and run up large levels of consumer debt. The average credit card debt balance is $7,327; that figure is only for those households that maintain a credit card balance. To put that figure in perspective, the average American household earns $53,046 That means that the average household has a credit card balance nearly 14% of their wages. Assuming roughly 70% of that is take-home pay, that means that most families have about $3,100 each month to pay for food, shelter, utilities, cel phones, car-payments, insurance payments, etc.
With all those expenses, how can you ever make a dent in that mountain of credit card debt? Even if you are able to make a small payment each month towards your outstanding credit card balance, the mountain of debt will continue to grow as you will incur new interest on the outstanding balance.
Let’s assume that you are better off than the average American with a credit card balance and only had a $4,000 balance. Assuming that you were able to carve off $400 from your available cash this month and paid off 10% of the outstanding balance; you would still have a $3,600 balance which would be subject to interest; the average interest rate on credit cards is about 15%. You would have to come up with $400 every month in order to pay off the balance in under a year; that presumes no additional purchases on the credit card during that time. How can you afford to make $400 monthly payments if you are bringing home $3,100 and have all of your usual monthly expenses? Likely you can’t. By not paying off your credit card debt in its entirety each month, you will not only incur additional interest, but you will also be hurting your credit score; more on that later.
The good news is that fewer people have outstanding credit balances than before. Just a few years ago, back in 2009 — right after the financial and housing crisis — 45%, nearly half of all American households, had an outstanding credit card balance. Today that percent has dropped dramatically to just 33%; only about a third of all U.S. households have an outstanding balance on their credit cards.
Credit card debt is incredibly easy to amass and extremely difficult to get rid of. If you have an outstanding credit card balance, do whatever you can to eliminate that balance. If you don’t have a balance, congratulate yourself, especially those of you who have gotten yourself out from under a large pile of debt.
Successful people rarely maintain credit card balances; they pay off those high interest debts each and every month. Instead of purchasing goods and services in excess of what they can afford, they take their available cash and invest it for their future.
#3 Start Investing Early
Start investing early. Believe me, what might seem small to start can really add up. You know who Warren Buffett is, right? He’s one of the richest men in the world. He also smartest investing when he was young and his new worth grew exponentially. Warren Buffett made $62.7 billion of his $63.3 billion net worth after his 50th birthday; he made $60 billion — nearly 95% — is from after his 60th birthday. Besides being a an incredibly good stock picker, Buffett also had compounding on his side; the more time you have to invest, the greater the opportunity there is for your money to grow.
Consider two people, both aged 25. One person, we’ll call her “Smart Sue,” invests $10,000 a year each year for ten years, then never invests another dime. The other person, “Dumb Doris,” doesn’t start investing until she turns 35. She also invests $10,000 per year, but instead of investing for just ten years, Dumb Doris invests $10,000 per year, each and every year for the next 30 years, until she turns 65.
Sue invested $10,000 a year for ten years, for a total of $120,000; Doris invested $10,000 a year for thirty years, for a total of $360,000. Who had more money at 65? Well, first the good news, both Doris and Sue would be millionaires. Sue would have amassed over $1.1 million. That will really help her in retirement, but her friend Doris would enter her golden years with nearly $1.6 million! A full $441,520 more than her friend Doris. How can this be? Sue invested so much less than Doris did. The reason: compounding. As was the case with Warren Buffett, the more time that you have to invest, the more money you will likely have.
Start as early as you can. Invest simply; most people are better off investing in a small group of index funds than in trying to find the next Apple or Facebook. Slow and steady wins the race. By the way, had Sue not stopped investing at 35 and instead she continued investing $10,000 each year until she was 65, she’d be a multimillionaire with a balance of over $2.8 million!
While most people don’t have $10,000 to start investing when they are 25, you should make a goal of investing 15% of your GROSS wages each year. As your salary presumably increases each year, you will make larger and larger investments which will help you grow your nest egg. You can do this, it just means living a reasonable life, not an extravagant one.
#4 Don’t Be Extravagant
Live within your means; you’ve probably heard this phrase before. Many Americans tend to spend freely; they buy whatever they want, whenever they want. Even if they can’t afford something, they still buy it with their credit cards, running up considerable credit balances.
Successful people not only live within their means, but many also live well below their means. The best example is usually car related; you don’t have to buy an Orange Lamborghini Murcielago LP640, you can buy a reasonably priced, reliable car and drive it for many years. There is no need to buy expense cars and there is certainly no reason to buy a new car every three years if your existing car is functioning well. It is not unheard of for cars to last ten or more years.
Imagine the money that you can save by buying a $25,000 car and keeping it for ten years instead of buying a $40,000 car every three years. (We won’t even get into the cost of the Lamborghini here.) Yes, of course, you likely won’t be spending the full $40,000 each time you buy a new car; you will be likely be able to sell you old car. Regardless, you will still be spending more money than you need to.
Further, most people buy their cars with a loan, relatively few people pay for their car purchases with cash. In today’s low interest environment, that’s not a terrible decision; after all, the interest expense is nominal. However, it’s a mindset; many successful people aren’t extravagant with their money, they live below their means, well below their means. A good friend leases a new car every three years. His rationale is that he has a fixed monthly payment that’s he budgets for. Personally, I would rather drive a car for ten years and invest the difference; many successful people agree.
#5 Maintain Good Credit
Debt is a serious issue; it builds upon itself making it more and more difficult to get out from underneath its huge, growing pile. Along with the anxiety and stress created by stress, there’s also a byproduct which further negatively impacts your life: poor credit.
It is incredibly important to maintain a good credit score. Many purchasing and lending decisions are based upon your credit score. A good or excellent credit score will not only allow you to get a loan if you need it, but it will also provide you with better lending terms. Conversely, those people with poor credit scores find it hard to get a loan and when they do, they have to pay higher interest rates as lenders are less confident in their ability to successfully repay their loans.
Successful people often have good or excellent credit scores which opens door for them. When they want to buy a new home, lenders are often willing to offer them a loan at attractive terms. If they are looking to get a credit card, it’s usually easy to obtain; and of course, when they borrow money on their credit cards, they pay them off in their entirety, each and every month. It’s good practice to check your credit score at least once a year.
A credit report includes information on where you live, how you pay your bills, and whether you’ve been sued or have filed for bankruptcy. Nationwide credit reporting companies sell the information in your report to creditors, insurers, employers, and other businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home.
To order, visit annualcreditreport.com, call 1-877-322-8228. Or complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.
Only one website is authorized to fill orders for the free annual credit report you are entitled to under law — annualcreditreport.com. Other websites that claim to offer “free credit reports,” “free credit scores,” or “free credit monitoring” are not part of the legally mandated free annual credit report program. In some cases, the “free” product comes with strings attached. For example, some sites sign you up for a supposedly “free” service that converts to one you have to pay for after a trial period. If you don’t cancel during the trial period, you may be unwittingly agreeing to let the company start charging fees to your credit card.