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Getting Rich Is More Than Dumb Luck

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The Tampa Tribune

Published: September 30, 2007

Why do some people get rich while others struggle to make ends meet? This is asked again and again by economists, sociologists and, understandably, those on the struggling end of the spectrum.

If your parents were like mine, they probably told you life's not fair. And luck certainly has a role to play (although I'm one of those people who believes you can make your own luck). But a boatload of recent research on wealth inequality points out luck isn't the only determinant of prosperity.

Lisa Keister, associate professor of sociology at Duke University and author of 'Getting Rich' (Cambridge University Press, $70) has spent a good deal of her time focusing on not just who gets rich in this country, but also why. What she has found is that upbringing and the things that come with it (religion, education, personality, social habits) have a huge effect on where you'll end up on the financial totem pole.

Does that mean you're stuck where you are? Not necessarily.

'It's tough to break out if you're born at the bottom,' Keister says. 'But what I've found is that there are a huge number of people who do move up.'

Here's how you can make that jump and get your children off to the right start as well:

Focus on education. A good education is a huge part of that background that shapes you financially. And although high school may have sufficed in the past, it's not cutting it now.

'People who finish college now do better in all sorts of measures,' Keister says. 'They do better in income, and by and far, they do better in wealth ownership.'

Although financial education has quite a ways to go, many colleges offer classes and programs on money management. More than that, college is a place to build social contacts that can give you a boost when it comes time to build a career. (Note: It's never too late to go back to school.)

Prioritize. If you want to build your assets, you can't open your wallet for every little thing you - or your kids - want.

'A lot of people have one asset, and that's their house. They mortgage it to buy consumer goods, and that's just foolish. If you can't afford to pay cash for your purchases, it doesn't make sense to buy them,' Keister says.

A big part of money management is making choices and learning to accept that you can't have everything you want. If your goal is to be rich, remind yourself every time you're in the mall. You'll fall into a pattern that will allow you to build wealth. In the process, you'll teach your kids how to set goals and make smart choices and that money isn't a renewable resource.

Save. The foolproof way to achieve wealth is to save early and often. 'I really thought I was going to find some super secret, but the truth is that the people who do well save their money every month,' Keister says.

I'm a fan of putting the whole saving process on autopilot. If you have contributions pulled out to a 401(k), IRA or other savings plan every month, you won't have to think about it.

Pass on the lesson. Kids learn by example, and they'll absorb your habits quickly. Make this a positive thing by showing them how important it is to live within your means and make regular savings contributions.

Technology tends to get in the way. Back when checks and cash were the primary means of making a purchase, your kids could see the money changing hands.

Now, with debit and credit cards, direct deposit and online banking, money doesn't seem as tangible. You have to make an effort to explain the process, from paycheck to purchase. And don't be afraid to throw in information about your 401(k) as they get older; Keister says it may have an effect on their future in the market. 'We can't help but look at what our parents did, and if they had a certain kind of investment strategy, we're more likely to use that same investment strategy.'

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