What’s the Difference Between High-Income Earners and Low-Income Earners?
Published on - August 19th, 2009 (by J.D. Roth) In June, a user at Ask Metafilter wondered: What are the differences between someone who makes $100,000/year and someone who makes $30,000? As you might expect, this question generated a lot of discussion — all of it interesting.
Many commenters noted that, from their experience, high-income earners generally exhibited several of the following traits:
- They maintain a strong work ethic.
- They don’t watch the clock.
- They seek to improve their skills.
- They do quality work.
- They’re flexible and adaptable.
- They maintain a good social network.
- They possess self-confidence.
A few commenters noted that there are two other factors that absolutely play a role in how much a person earns. Chief among these is choice of profession. Even if you’re the best damn high school physics teacher in the world, you’ll still probably earn just $50,000 or so. (But if that gives you a fulfilling life, that’s probably worth more than a high salary.)
Hard work, etc. do not guarantee a higher salary — but they do improve the odds. A second oft-overlooked factor is luck. Chance. Happenstance. There’s no question that luck plays a role in how much a person is paid. But as I’ve argued in the past, in most cases luck is no accident. It’s possible to make your own luck — to a degree.
There are many great comments in the Ask Metafilter discussion, including a mention of a Platonic dialogue about wealth and economics. One of my favorite comments is from decathecting, who writes:
Lots of people make six figures, including plumbers, business managers, attorneys, high school principals, military officers, technicians, landlords, psychologists, and people in thousands of other professions. The common denominator is that they’ve figured out what they’re good at that other people are willing to pay them to do.
From my own experience, I know that while I was stagnant and uninterested in my career, my income was also stagnant. It wasn’t until I decided to take charge of my own life that my financial situation improved — including the amount I was earning.
I’ve seen the same in the lives of my friends. It’s easy to coast, to become complacent. But it’s important to remember that with incomes especially, nobody cares more about your money than you do. If you want to earn more, you must play an active role in obtaining the money.
Finally, I want to note that a high salary is not the the panacea that many people believe it to be.
Sometimes the costs of a high income make the payoff less than you might expect. For example, I have a friend who is an attorney. He makes a fair amount of money. But he’s also burdened by outrageous student loans and business expenses. Though his income is high on paper, it’s actually rather modest after he’s paid for his necessities.
High income earners face another problem that prevents them from getting ahead: lifestyle inflation. Sure, that’s a nice problem to have, I suppose, but if you don’t learn to control your spending as your income increases, you’re not really much better off in the long run than somebody with half your salary.
Ultimately, I don’t know if it’s possible to say that there’s any one magic thing that leads one person to make more than another. Yes, hard work probably makes a difference. But so does luck. Have you noted a difference between the high-income earners in your life and the low-income earners? Is there a pattern? Or does it all seem rather arbitrary?
Addendum: I seem to have done a poor job of conveying my message today. I’m not trying to imply that “poor people are lazy” or anything of that nature. However, I do think there must be differences between high-income earners and low-income earners, that it’s not purely a matter of luck. So, what are these differences? It must be possible to have an intelligent conversation on this subject without being rude and without becoming defensive.
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When survival is a struggle ALL your time is spent finding better.
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Don’t forget education. I have seen many jobs that could be done by anyone with the appropriate training; however, they require 4 year degrees just to apply. That excludes many.
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Your example of the high school physics teacher was a good one. My husband has the same situation. Despite the fact that he has two degrees and is a very hard worker, as a military enlisted person he will likely never see a high salary. I’m sure in many other types of professions it may be true that harder work does generate more income, but not in the military.
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wow, I just checked our pay stubs this month and we make more than $250k…yeah us! i remember making $30k/yr it was satisfying too…i was by no means struggling then, nor am i now.
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Clearly no one (except maybe JD) is going to read this comment, but it reminded me how hard it is to see your own privilege. I mean, I live in the UK (an industrialised wealthy country), I’m white, straight and middle class. This is associated with a particular sub-culture gives me huge advantages that I barely notice.
It’s not until I talk to some of my friends who are black, or from working class backgrounds who have more useful personality traits than me that I can see the advantages.
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“When survival is a struggle, it’s very hard to find the time to even consider finding better.”
That’s an excellent point. I remember reading Barbara Ehrenreich’s book about living on minimum wage, and she talked about how the eating habits of the poor were so shortsighted and financially detrimental. She suggested that instead of eating expensive prepared foods, you could make a large pot of cheap but healthy lentil stew at the beginning of the week and eat that instead! What such a suggestion fails to account for is that these people are EXHAUSTED. It takes planning, wherewithal, and resources both material and emotional to do that.
And to extend that – if life is such a struggle for some that they struggle to improve their diet or other daily tasks, what makes you think that they have the energy or the time to change things? When you work multiple jobs to feed your children, it’s hard to take classes at night. When you barely make ends meet every month, it’s hard to do much of anything else. And when you do have time to yourself, I imagine you want to do something to unwind.
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In my humble opinion, high income is most directly tied to belief that someone can earn high income. As worthless as this sounds its true. For example, I personally know a family of Chinese immigrants that came to America with nothing. They all worked together, living very, very frugally and worked low income jobs. They were able to buy real estate and restaurants and have become very wealthy. Though lacking education, english skills and resources they built a high level of income. The same is true of a person regardless of income that purchases a lottery ticket, they do nothing more than purchase the ticket and gain high income. However, they wouldn’t purchase the ticket if they didn’t believe they had a chance at the income. The lottery example is a simplified approach that happens to middle/upper income people that expect to make a certain income, many go to school and gain that income they want and believe they can achieve. Its also fairly true of the sleaze bags mentioned above, they believed they could gain that income. I would guess that the highly intelligent geeks from school that work hard have higher than average incomes, but also the society types as well earn high incomes. Both have a belief in there ability to gain income. The geeks from study/intelligence and the society types from social success. I guess my point is that a true belief motivates someone first. Sadly alot of Americans, can’t see the vision of how they are going to really increase their income. After the vision of being successful, comes the hard work, the ability to plan, and the willingness to do what others won’t. But it all starts with belief. It is the same as the quest many of us have for financial freedom. We couldn’t see it before someone showed us, and we talk to our friends and family and they just can’t see it “but you have to have a car/house payment.” To imagine higher income, what would happen if you took those savings after getting out of debt and instead of putting them into those mutual funds for retirement, you put them into a business you believed in…you could be a very high income person yourself.
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I am a teacher in a fairly expensive area. My base pay is is around $60k; I also work summer school and another after school teaching job which boost my total income to about $75k. I finished my M.A. in Education to maximize my income within my profession. If I were even more industrious, I’m also qualified to teach collegiate courses to teachers in training, I could tutor, I could participate in a program to provide support to new teachers, I could write a book, etc.
I love teaching, but I also want to maximize my income! More importantly, I want to save as much of my earnings as possible to create stability for my family. I think that was J.D.’s intent here – to allow us to share ideas to improve our situations (financially or otherwise).
As for my role models…both of my grandfathers were poor children of immigrants who retired as military officers. While saving their retirement pay, they both continued to work second jobs, growing their wealth. Both of my grandmothers worked as nurses for the Army and afterwards, including traveling overseas to serve in the war. Both of my parents are college graduates, and my father chose to sign up with the Army for a stint to finance his Master’s degree. I grew up enjoying the comfortability of an upper-middle class life coupled with reminders that it wasn’t free, and I’d have to work hard to maintain that for myself in adulthood.
Here is another major factor: I’m not going to have kids. I like them, I work with them, but I’m not going to have any. I’m not passing judgment on anyone else’s choice or life circumstance. Some people really want to be parents and are willing to make that sacrifice – kudos to them. Us DINKS (dual income no kids) have a heads up on growing our wealth.
In order to accumulate wealth, I think it HELPS to have:
-role models who are savers / wealth accumulators
-energy, ambition, and focus
-a positive attitude
-a social network of friends with positive attitudes
-a healthy lifestyle (no drugs, gambling addictions, major drama, legal troubles, etc.)
-a college degree
-a dual income household
-no kids or other family members to support (I am NOT saying that I’m not willing to help out family, but the reality is that supporting others is a major expense and will take a huge bite out of growing your wealth)
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I know people from all economic backgrounds and who are in a wide range of income levels. There are super people in all income ranges but I observe the SOME who make a lot of money have more debt than their six figure income can cover at times; they tend to have more personal and work related stress and less time along with the stress of keeping up appearances. One question why when the income goes up does common sense go out the window and the urge to change appearances become so necessary. Given opportunity to dramatically increase my income intent is to stay put in my house continue to drive my paid for car and channel the extra new found income into a retirement fund or Roth IRA. Just amazing to me the number of celebrities, athletes and people from life who make a signiicant income who wind up in the paper under captions of bankruptcy or other issues. Do they not use common sense if not they make enough to at least get a good reliable trusted bookkeeper or learn to do old school – stay out of debt and put something aside for a rainy day. Most parent and grandparents mention that somewhere in our upbringing.
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What if “what you do best” is not being an attorney, doctor, engineer, etc. but something that does not pay six figures?
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@Nancy,
People have become wealthy by being good at everything and anything. Open the yellow pages, there are thousands of ads for companies that do everything from A to Z (literally). The owners of the larger companies across that book are probably wealthy. My point is, and don’t take this the wrong way, from your comment I perceive that you probably don’t believe you’re going to be wealthy. The reality is this thinking does hold us back. There are people that make the best tortillas, a most humble bread, and have made millions doing it better than anyone else. So believe you can change your life and then decide if you want to do it, because it won’t be easy. It may not be worth it for you to work 80 hours+ a week to gain wealth. You may prefer to spend your time with family, but don’t assume that you can’t build alot of wealth, because you can. In your example of a doctor, they have spend years working at learning. Most doctors work hard in high school to get into a good college, then comes more hard studying in college and medical school, then long hours of residency and internships and then finally, typically 14-18 years after they started they begin making great income. Belief and hard work will help you build wealth, but building wealth is like anything, it rarely comes cheap and its price may not be worth it.
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Nancy asks what is what you do best is not a 6 figure income? No job title is a guaranteed income. One of the richest men in the world, Bill Gates of Microsoft would be considered an engineer by many, but he dropped out of college. I don’t believe he has an institutional education beyond high school. Conversely, I know of a doctor who had to take a job as a factory worker.
There are plenty of anecdotal stories like these. There is no guarantee of income for a job title. Any body can make money doing anything; and they have.
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Nice to see that poor-bashing is alive and well on PF blogs. I’m financially sucessful AND I’m sickened by some of the moralistic and superior finger-wagging about the supposed laziness and lack of drive of lower-wage earners.
Some people here cited The Millionaire Next Door tp prove that hard work and financial acumen are always what gets people ahead. I suggest these folks read Richistan. You’ll learn that even multi-millionaires and billionaires overspend.
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Bill Gate’s family was already wealthy when he borrowed $100,000 from them to start Microsoft. This was during a time when an average size home sold for $25,000. So he had a leg up -if he had not been rich to start with but still is a very smart person he would have had to pursue funding in other ways. And if his venture had failed, he would have had a really good family network to fall back on nor would have loss of the $100,000 left him and his family bankrupt.
As #213 PChan says: “sickened by some of the moralistic and superior finger-wagging about the supposed laziness and lack of drive of lower-wage earners.”
As we all know money makes money and hangs around money. As some others mentioned early on in the comments, some people are better networkers among the wealthy or come from that environment that helps keep them in that environment.
Personal case via my sister: She went to high school in a central New Jersey town with two girls who ended up pursueing the same type of career in college. I don’t remember particularly what career it was but let’s say magazine editing. Classmate 1 came from a poor lower middle class family with 4 or 5 other younger children, and Classmate 2 came from an upper to uber wealthy family with only 3 children. Both the women went to about equivalent colleges and get UNPAID internships with equivalent magazines in New York City.
Classmate 1 takes to the intern job like a pro, has great performance- almost like she was born to it but cannot afford to live in NYC for the intership period and has to commute back and forth to her parents home in Central NJ every day which stretches her days to 12 hours.
Classmate 2 doesn’t due such a great job- mostly fair to acceptable but she is able to network with uber rich friends of her family who are traveling for the period of the intership and lives for free housesitting their NYC apartment during the intership period. She is able to then network with her coworkers after work hours.
Classmate 1 cannot continue to afford to commute and runs out of money. She has to drop her internship even though the magazine loved her work and return to her college. She then has to drop out of the college for a semester to work and live with her parents to get enough money to finish college which ends up delaying her graduation about 1 year. She eventually graduates and ends up managing an ice cream shop locally to her parent’s home making about $25,000 per year.
Classmate 2 finishes her intership with so-so work performance but with profuse networking and is offered a job at that magazine after she graduates starting at $65,000! Her parents give her money towards a downpayment on a condo in the suburbs of NYC so she is able to afford to live in the area.
So the person who would have benefited that industry the greatest was unable to do that because she couldn’t afford the travel and a person who was about average got entry into the industry and to contribute to it because her family had greater resources to get her there…
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I was responding to Nancy who asked how you do it if you are not a good doctor, attorney, or engineer. Bill Gates is none of these, formally. I do not believe he has an earned business degree either. The borrowed $100k did not build Microsoft either. If it did we could all borrow $100k and become billionaires.
Microsoft was built on a dream and a vision. It started with thought. The reason Bill dropped out of school was because it was getting in the way of his goals. As I’ve said since #46, it is not job, title, parent’s income, luck, amount of work, or any advantage one person has over another. It starts with a belief, a thought. Hanging on to that belief leads to the actions that take a person to their destiny.
Bill’s dad did not walk into his bedroom one day and say, “Bill. What are you doing this weekend? Here is a $100k, why don’t you go build a world class software company?” No, Bill already had the vision, the thoughts. Bill already knew what he was going to grow. The money was just seed money. The money was just one of the opportunities that appear when you have a goal. As was stated, if he didn’t get it from his family, he would have gotten it somewhere. Nothing could have stopped him. If Bill Gates had grown up in a grass hut in Africa, he would still be the billionaire he is today. Because his success comes from within. Anyone’s success or failure come from within. Success or failure is just a point of view.
After testing something like 10,000 different things for a light bulb filament, Thomas Edison was asked how it felt to have failed 10,000 times. His reply was, “I have not failed. I have successfully found 10,000 things that won’t work!”
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As Dave Ramsey often says “Your raise is effective when you are.”
Want to make more money? Work at making more money. Increase your skillset, your knowledge pool, and get introduced to and try to be around people who make a lot of money. The latter sounds hard, but its not really that difficult.
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It cannot be helped, J.D.
People in all matters of differences between human beings, will find something to nitpick about.
Race, weight, looks, religion, beliefs, values culture, ethnicity, gender.. and of course, money.
I agree with what you say. Still, there are exceptions.
Not everyone who earns a high income was smart or good at finding out what makes them money.
A lot of it is luck and opportunity as well. And cultural upbringing (females are hit hard here), as well as family values on what they consider important.
Anyway, you don’t need much money to live a great life, as J.D. said. It’s just really nice to have such a great cushion of a high income ($250k/year) in addition to a very low cost of living ($12k/year), which is what BF and I are aiming for.
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My Dad always liked to say “Luck/Success is an accident, but you can work to be accident prone.” His point was that it was about attitude, how you react to things, and how you let them affect you. I have found many people say things like “I deserve it” or “Good things happen to everyone but me.” Negative emotions like that turn people off, make them not want to pick you for the promotion, or the new job.
BTW, I’m not talking positive thinking here either. You have to actually BE a positive person. Thinking positive is just putting frosting on crap…it may look like a cake, but it ain’t.
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1. Luck is a HUGE factor
2. Don’t sob for teachers. The lifestyle is pretty darn good for the wage that they earn. 3-ish months a year off, every holiday in the world off, 2 weeks vacation, world-class benefits, state pension. I will NEVER weep for teachers. Great gig, IMO.
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Ok, here’s the thing. I’ve pondered as obviously a lot of people here have, on this very issue. And this is in no way meant to be judgemental. But it really seems that in order to ever hit a cap of over, say $100 grand, you will eventually have to succumb to deceiving more people in your life. I really don’t mean this in a bad way, but honestly a lot of people that are millionaires are there due to sales and commissions work of some kind. You sell your soul (your mind, your will, your emotions) to convince someone of something that is “good” for them, that they can’t live without. And isn’t that why a lot of are where we are. Example, I would not have been able to go to college without taking out student loans. When I graduated college on my very meager teacher’s salary, I couldn’t even make the smallest payment which at the time was like $400 bucks a month. I’m not stupid but I kept being persuaded to defer it or forbear it. The student loan corporations are sincerly able to practice legalized loan sharking. But I was constantly convinced (sales tactics, commissions see?) Those different people were making commissions off of me (pimping me as it were). Not that they made that much, but the larger company did of course. This is why that is the one stronghold area they won’t allow to qualify for bankruptcy. They depend on us to be able to pay into them for the next God knows how many years. Sadly it’s like you were screwed from the start. That’s just one example, think of many other industries whereby sales and commissions have propelled people over the wall to the land of wealth. So no I don’t believe it’s that they have a stronger work ethic or many of the other suggestions. There are plenty of people who do seemingly meager jobs who really value work and will stay if people need them to and go extra miles. It’s (again not generalizing to all who are high earners), but many are just flying monkey, evil henchmen to the larger wicked system. Deceit, envy and greed run the gamut to the whole crabs in the bucket mentality. But thankfully on both ends of the spectrum, high earning and low, there are those whose hearts are ruled by love and wisdom. Or else our world would be even more screwed than it is right now.
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Ok once again I have to have this conversation with a person, being a teacher myself. People, can we please stop thinking teachers live some lavish lifestyle full of bene’s? We DO NOT have it like you think we do. For post #219, which is right before my other one. Here’s the deal, in reality, teachers would really have to work in the summer. What people don’t realize is that what many do to not have to do that and be able to take an “uninterrupted” “vacation” as it were, is that we VOLUNTARILY ALLOW our payroll departments to hold back a certain amount from our paychecks all year long (or rather for the 9 months or so of school)to redistribute to us during the summer months. People always think “Oh, you guys get paid over the summer and you don’t even have to work”. We don’t get huge bonuses all the time. So therein is the trade off. Be honest, would you (outside of 401K’s and other deductions you might already have) VOLUNTARILY ALLOW your current employer to take a significant chunk (and I do mean a pretty big wedge of cheese) out of your paycheck every two weeks. In these times, are you kidding me? Yes we have holidays off, but you may not be aware as well that a lot of our “summer” is spent going to required trainings that help you to keep your licensure with the state you work in. By the end of most school years, you are required to have had so many hours in professional development. When else would we have had time to do it, what with grading and projects, conferences etc. We don’t get to write off lunches of only 25-30 minutes that were spent calling parents or counseling kids who are having a bad day and only getting 7 minutes to sit down and eat. Most teachers have their break time down to a science of microwaving their lunch, going to the bathroom, making a call or running a copy. Let alone the hours often spent after school. During the school year as well, whether having families or not, we often spend nights and weekends in preparation or other trainings to keep abreast of our professional development. And why shouldn’t we have some time off? We spend weekends shopping for our class as if they were our own kids. And then someone will say that’s your own fault. Think of it this way, if you go see a movie or a great show, there was a lot that went into before and afterhand that made it awesome. But we are not paid according to our true value of helping to create all other professions. What people want and tell us we should be satisfied with is being a “Charlie Brown teacher”. Ever thought about why you never could here anything but “Wah, wah wah-wah, wah???” The teacher was mundane and the class time was unimportant. Praise those of us who truly try to engage kids short of doing Krusty the Klown backflips in class, or having kids play Halo all day and doing whatever we can on meager incomes that we can barely “write things off for” (vs. business world)for making learning engaging. That’s why most people can remember their favorite and least favorite teacher. So again, people please think about assuming this or that about teachers.
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just thinking said: “it really seems that in order to ever hit a cap of over, say $100 grand, you will eventually have to succumb to deceiving more people in your life.”
No.
There are TONS of people making over $100k who aren’t just evil liars.
I work in a building full of engineers and I’m assuming most of them make >$100k. Virtually every doctor or dentist out there undoubtedly makes >$100k. Most professors at universities make >$100k. These professions account for many if not most of the people making >$100k. They are not built on deception.
Regarding teacher pay: What is your degree in? What are you paid? What state is it in? What else would you be doing with your degree in your state?
Teachers are usually not low income given the 9 month work year and substantial benefits. I don’t think people are saying teachers are highly paid, just that they aren’t really as underpaid as people think. Of course teacher pay will vary substantially based on location.
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You know, I was thinking of going into teaching. Then I saw what the starting pay was and realized that I simply couldn’t afford the almost 50% pay cut. Even with summers off, it was not feasible.
To all of you people who think teachers have a cush, overpaid job–if it’s so great, why don’t you do it?
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The rich tend to believe that they have worked hard and earned their way in life. It makes sense that they would not want to admit to being privileged, spoiled, lazy or just lucky, for those who may not have earned their way.
Similarly, the poor tend to believe that fate or chance has placed them in that position. Naturally, they would not want to admit that laziness, complacency or other undesirable traits have earned them a low income in life. I feel that some people may bounce around from job to job, maybe just doing the bare minimum, and then they don’t take accountability for their actions or try to improve their performance at the next job. However, I also feel that some people who are poor genuinely have been fated with a tough situation. You never know who’s caring for a dying or disabled family member, has a serious/painful illness, etc. and might not be available to take on extra duties at work, volunteer to go above and beyond, or even think of such ideas while engaged in a true struggle for survival.
http://en.wikipedia.org/wiki/Locus_of_control
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I notice the word “luck” used a lot, but what I don’t see mentioned very much is “skill”. Some jobs require talents that are, for lack of a better term, God-given. For example, someone with shaky hands will never be a high-paid neurosurgeon. Some abilities hard word and practice simply cannot create.
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Interesting post. I don’t think is a matter of laziness. Supply and demand plays a big role here. What are people willing to pay and how available are the people to perform a particular job?
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I’d also add:
- They surround themselves with other successful people. Never underestimate the effect of learning through osmosis. The habits of other successful people rub off on you.
- They mimic the habits and skills of those those that are more successful then them. In the work place and in life, I find the most successful person in my interest group discuss with them what makes them tick and what how they work.
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Many of the higher income people that I know make more because they took a big risk to get there. They either took an internship that paid little to nothing, invested in a start up, or took a position overseas that led them to where they are now. Sometimes it’s just making a huge leap that gets you to where you bring in serious cash. If you always play it safe, something will not (likely) just land in your lap out of the blue.
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Another factor that no one has mentioned is health. The state of your childhood health has a huge impact on your success later in life. The nutrition you receive impacts your ability to learn and your energy levels. Studies have shown that asthma rates are much higher among the children of the poor, who incidentally live in neighborhoods with much higher air pollution rates. (Often times because they are near to the factories where they work.) Missing school due to illness impacts how much you learn which impacts your grades which impacts whether or not you are able to go to college.
Additionally, I have an engineering degree and I worked as an engineer for several years, before turning to teaching. I took almost a 50% pay cut and as much as I loved teaching I burned out after 5 years. It is the hardest job I have ever taken on. I was lucky because I had already paid off my student loans by the time I started teaching. I can’t imagine adding the stress of having that additional expense to the low pay.
The truth of it is that there are many factors that go into ones’ income level. Hard work is part of the equation, but it is only part. For those of you pushing the entrepreneurial spirit, remember that 60% of all new businesses fail in the first three to five years. It takes more than hard work and knowledge to make a business thrive and yes some part of it is luck. Hiring managers often get down to two or three potential candidates who would be great in a position and they have to choose one. While sometimes something like a thank-you note can make you stand out, other times it is chance. It doesn’t mean you didn’t work hard to get there, but it does mean that others worked hard to get there too, but didn’t get the job.
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There’s something else that i think hasn’t been touched on although it may be a bit depressing. Sometimes higher earners are those willing to exploit people or situations for their own personal gain. I briefly worked for a company that was contracted to sell AT&T coverage to small businesses. Several of the people who trained me encouraged deceiving customers into thinking that their bill would be much cheaper than it was going to be or adding extra or more expensive services on the plan after the paperwork had already been signed. I left after I found that almost all of the companies highest earners exploited their customers in this way on a very regular basis. The management doesn’t care as long as the sales reps are discreet and careful. Remember to always go over the paperwork several times before you sign anything.
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