Where Does Money Come From?
Why is this stuff so hard to hold onto?
One of the great tragedies of my generation is that we don’t understand where money comes from.
I’m not exempt from this.
One of the fundamental issues of 18-to-35-year-olds is that we don’t understand how to make money.
That seems basic, but if it was why are we doing so poorly? Why are so many of us moving back in with our parents? Why are we so frightened to go out and live on our own?
The Problem
I talked about this issue a bit in money 101, but it’s worth another discussion.
The problem starts when we’re young. Our parents don’t teach us about money in any sort of depth. Instead, we glean our spending habits from TV, credit card offers, and the spending habits of those around us.
And with poor spending habits come poor earning habits.
As children, most of us were handed money from our parents. I was blessed with a family who made sure I understood that money comes from work, but many of my friends weren’t so lucky.
Instead of working for their money, many in my generation received an allowance. By the time they hit high school that allowance had turned into “I need some money to go out with my friends” and their parents were all too happy to oblige.
It’s becomes a magical piggy bank that’s never empty. And without bills, hard work, or interest many of us have no idea how to earn money.
Unfortunately, college isn’t much help. Until recently, it was easy to get a credit card as an unemployed 18-year-old student. You don’t need a job to go out with your friends, just a credit card with a $5,000 dollar limit and a 25% interest rate. Like with our parents, we assumed this was free money.
Those of us lucky enough to miss out on credit cards had student loans available to pay the bills, buy toys, and do the things we enjoy. We were never told that student loan are unbankruptable, and that we would be paying them off into our 40s. No, all we knew was that, like with our parents, money came without effort or consequence.
Even worse are auto loans. A friend of mine who was unemployed and struggling to eat was given a $20,000 dollar car loan. She was told she’d have plenty of time to find a job and pay it off since they wouldn’t make her pay anything for 4 months; all the while gaining interest. She got a minimum wage job and almost drowned under the debt.
You may think this situation is unusual, but it’s not.
Our parents assumed we would know the lessons their parents taught them. But we didn’t learn them.
The banks, creditors, and financial “experts” were no longer trying to help us, they were trying to sell to us; or, as the Bible puts it, to own us (Proverbs 22:7)
At graduation, we were left with a college degree and a pile of debt.
Most of us don’t know how to get a job, how to work hard, or how to sell ourselves. Instead, we know how to get A’s on multiple choice tests (that get easier every year) and how to use someone else’s money (Visa’s, Sallie Mae’s, or our parents’).
Where Money Comes From
So where does money come from? It’s easy to say, but harder to understand.
Money comes from work. It isn’t something anyone deserves, it is something that’s earned.
As Dave Ramsey likes to say,
“Your ability to earn money comes from your ability to go out, kill something, and drag it home.”
Another way to say that is, you earn money when you can do something that someone will pay for. If that’s designing a smart phone that changes the world, then you will earn a lot. If that’s flipping burgers on the weekend, you won’t earn as much.
Where do we start?
We start by killing the myth that all work is fun and fulfilling. A lot of work is boring and difficult. Even jobs you love will sometimes grate on you.
Let me say that again. Even if you love your job, sometimes you will hate it. That’s a truth most people don’t want to deal with.
The second thing we have to do is learn that enjoyable, high paying work takes time. Think of people you know who make a lot of money. I’m not talking about people with big houses and nice cars. I’m talking about people who earn $100,000 or more a year and can keep a good chunk of it in the bank. People who have wealth, not stuff.
How many of those people are under 50? Statistically, not many.
Most people under 50 aren’t working a job they love and making over $100,000 a year. That kind of income takes time. The average 30-year-old is still trying to figure out what she wants to do with her life, not working the job of her dreams. And statistics tell us that the highest income you’ll make will be between 50 and 65.
It’s reasonable to take 50 years to earn the knowledge, experience, and expertise in a field that demands that kind of income. Some people do it earlier – but most don’t.
Finally, we need to get out of debt. Debt steals your ability to take chances, to experiment, and to build wealth. If you leave college with $50,000 in student loans, $20,000 in car debt, and $3,000 in credit card debt you pretty much have to take the first job offered. But if you are debt free, have a solid emergency fund, and are budgeting every month then you will have the freedom to test different jobs, expand your knowledge, and grow in the marketplace.
Easy to understand; difficult to live out.
When you graduated college, where did most of your money come from? If you’re in college, where does most of your money come from now?
For more resources on getting work check out 48 Days to the Work You Love:
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The only thing my parents taught me was that money doesn’t grow on trees, but then again they also taught me that I could be anything I wanted to be but I’ve yet to become a lottery winner, so obviously they’re liars and I’m going back to look for the tree!
Lol!
My father always told me that the only economic security you have is your ability to produce, so I guess I had a pretty good upbringing there.
Your point about those in their 50’s being in their peak income-earning phase, I wonder if that will remain true. It seems there’s a trend away from seniority-based compensation. I think things are flattening out somewhat and guaranteed pay raises over time may be a thing of the past. I could be totally wrong, but I wonder if things are changing.
I try to think what would life be like if I never earned more than I do now — or even less. I think a lot of people get into problems when they assume their income will always be on an upward slope.
The reason their income increases isn’t as much because of long-term employment raises or anything like that, but because over the previous 50 years they have gained the knowledge and experience that allows them to do things they couldn’t do before.
I know a career coach who encourages you to ignore deciding what you want to do with your life until you hit 50. His reasoning? Most people don’t have the experience and history to know that answer until about 50.
But yeah, it has less to do with years of service for a particular company than the abilities that come with all those years of experience.
Alex, as a 55 y/o health professional, I agree with you career coach. I still don’t know what I want to do when I grow up. I recently tacked on a grad degree, and that combined with 30+ years of experience do put in a position where I have some options. Consultant? College prof? I don’t know yet. My wife, who is an RN, longs for a career as a photographer.
I would like your feelings on retirement, which I have no plans to do. I heard Rush Limbaugh, whom I otherwise have no use for at all, state that he never intends to retire–as long as he has earning potential, he intends to work. I agree, if for no other reason than that there is so much to do, I’ll need a lifetime to get do even half of it.
I believe retirement savings should be part of any financial plan. I talk about that a bit in the Money 101 series.
However, I don’t think of retirement as the time you stop working. Instead, it should be an extension of the life you’re already living. If retirement is sitting on the couch watching re-runs, then you’re missing out today.