OTHERS ARE LUCKY. But we deserve every penny we have, right? The distinction between “just deserts” and “just plain lucky” strikes me as far messier than we might initially assume. Consider just seven of the ways that we can be financially lucky or unlucky:
1. Birthplace. If we were born in the U.S. or another part of the developed world, we’re pretty much starting the 100-meter sprint within a few strides of the finish line, not only by historical standards, but also compared to the rest of the world. If that wasn’t the case, we wouldn’t be having a national debate over immigration.
2. Parents. Even within the developed world, some are born with far greater advantages than others. If our parents launch us into the adult world with some cash, a good education and no debt, we start life with a leg up on most of our fellow citizens.
To be sure, this advantage is frequently squandered. Affluence is often the death of financial ambition—and sometimes all ambition. This might fall firmly into the category of “First World problems.” Still, it strikes me that raising children in an affluent household, while still ensuring they have the drive to make the most of their abilities, is a tricky task.
3. Talents. Recently, I wrote about how we’re constrained by the “hand we’ve been dealt.” Some are born with talents that are richly rewarded by today’s society; others aren’t so fortunate. But instead of gazing longingly at the fine cards held by others, we should focus on making the most of the hand we have.
4. Mentors. Our colleague—who works no harder and seems no better at his or her job—rises rapidly through the corporate ranks, while the rest of us are left behind. What made the difference? It could be as simple as personal chemistry: Maybe someone in senior management took a shine to this one employee and pushed for his or her promotion.
5. Health. No matter how careful some people are with their health, they spend their lives struggling with physical and mental ailments. And even if we enjoy good health, we could find ourselves responsible—financially and otherwise—for someone who isn’t so lucky.
6. Relationships. For those who are coupled up, the earning ability and spending habits of their spouse or partner can make a huge difference to their own financial success, and yet there’s a good chance we won’t have this information when we commit to one another. The reality is, we may not fully grasp our partner’s financial habits until we’ve been together for a few years—and it may be a decade or more before we know whether he or she will have a successful career.
7. Markets. If you retired in 2000, you would have struggled through a decade of lousy stock market returns, even as your own need for spending money drained your portfolio. By the time the current eight-year bull market kicked in, your savings might have been sadly depleted, thus limiting your dollar gains. None of this was your fault: It was just bad luck.
By contrast, if you had entered the workforce in 2000 and started investing regularly, you would have spent the next decade buying stocks at all kinds of prices, some high, some painfully low. But if you had stuck with it, you would have got your reward: When stocks took off in early 2009, you’d have had a healthy sum invested—and your money would have more than tripled over the next eight years, with any additional savings further padding your portfolio. None of this was due to your brilliance: It was just a lucky sequence of investment returns.
By talking about luck, I’m not denigrating financial success. I like to think that, with a tight grip on the purse strings and a modicum of common sense, everybody can be financially successful. But a little luck can make success a whole lot easier to achieve.
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