Updated May 1, 2021
Did you parents, or other adults in your life, have some rules of money they lived by? Or did they even talk about money?
All of the adults in my life had different incomes, but they all operated under the same basic wealth principles. They started in their twenties and put away a percentage of their paycheck for life. And they had pensions.
These are the adults who taught me about money. Like me, you might have come from a blue-collar family. Our mothers, fathers, uncles, aunts, and cousins try to give us advice based on what worked for them.
They tried to help us understand the world as they see it.
And I’m afraid that students, when they finish their degrees, are tempted to sink back into seeing the world the way their working-class parents did. But I don’t think income and wealth will work the same for our generation. The world of benefits and pensions is gone. So what can we do about it?
I’ve recommended various money books on Roostervane, each of which I learned something from.
I’ve learned that most personal finance books are the same, but different. Some want you to pay down debt in a debt snowball. Some want you to pay yourself first. Some want you to do extreme coupon clipping and savings until you can retire early.
There are a million different ways to deal with your money. So what follows are not really hard and fast rules of money, but they are observations I’ve made onto wealth in the past years.
Rule 1: You must fight for a better money mindset.
I was raised to think “there’s never enough money,” and we’d scrape by on what we had, going without most things in the process.
Furthermore, as religious people, my parents would moralize our poverty. We were “content with what we had,” implying that desiring more would be sinful.
We knew that “the love of money was the root of all evil,” and “God provides what we need.”
Since nearly everyone in my town was poor, the rules of money I learned from my blue-collar peers to hate the “rich mothafuckers” who owned the mines or the mills, and usually lived far away in Toronto.
Then, when I finally broke free of my impoverished past and went to university, I learned from professors that the rich were exploitative and lived off the poverty of others.
Is it any wonder I was terrified of wealth, and associated it with all sorts of moral and societal evils? I was trained to hate it, to think implicitly “I don’t want it.” (Ironically, the many people who harped on the wealth in my hometown still seemed able to cough up $40 a week for lottery tickets.)
I was fortunate along my journey, to meet some wealthy people. I realized something about them pretty quickly. They weren’t greedy or evil. In fact, they were some of the most generous people I’d ever met. They made their money running businesses that employed people, putting food on the tables of dozens of families that wouldn’t be there if they hadn’t started their business.
I knew one wealthy couple who on several occasions donated thousands of dollars to families in need in our community. The couple never told me this. The benefiting family accidentally let it slip one day.
Wealthy people, in fact, drastically repositioned my own understanding of wealth. I came to realize that wealth doesn’t make you good or bad. It makes you a bigger version of who you already are.
People who are assholes become wealthy assholes, people who are generous become wealthy and generous. If you are filled with goodness and kindness, money amplifies your ability to be kind.
Your beliefs about money will dictate your relationship towards it. If you believe, even subconsciously, that having money makes you bad, or greedy, or is unspiritual, it’s not much of a surprise that you will live in poverty.
You’ll sabotage your own financial success to get back to that place. If you believe that you’re a good person and that money could both give you a great life and amplify your goodness, you will likely begin to acquire some.
It’s one of the most important rules of money I never learned.
For those of us who were raised poor, this mental shift is not easy. It’s difficult to de-program all the money mindset you’ve learned over the years.
But it can be done. Read money books. Get around wealthy people you admire, either in person or online. Try to identify where your beliefs about money came from. Ask yourself why you have them and if they’re serving you well. And start to change them.
Rule 2: Money is an exchange of value.
What is earning, really? It’s an exchange of value. You give value to someone, providing them with a product or service, and they tell you how much it’s worth to them by paying for it.
I own a business. I watch my business spending carefully as I do my bookkeeping and accounting. If I could hire a business coach who would teach me to increase my revenues by $100,000, and it cost $20,000 to hire that person, I would probably do it.
Imagine I was hiring a new person for my company. If I knew that I could do an extra $200,000 worth of research this year, and that new person’s salary would cost me $100,000, I’d probably hire them.
However, value isn’t always a direct exchange like this. If I hired a marketing expert who gave me cross-country exposure and greatly increased my company’s visibility, it would be an investment in my brand that didn’t have immediate financial ramifications. But I’d expect it to eventually.
When you publish for free in a peer-reviewed journal, or even pay to publish (as they do in some sciences), you are recognizing that the value that has to your career is worth your time investment.
Beyond individual financial value, we also make decisions as a society about the sort of things we value. Sometimes these are things that the marketplace doesn’t value.
When our governments invest in the arts or humanities, they are signalling that—even though these things don’t have a strict marketplace value—they are valuable to us as a society.
As you go through your life, you will be compensated for the value you bring to people. That’s it; the second rule of money. Money is an exchange of value.
Rule 3: Spend less than you make.
At the end of the day, wealth—and the accumulation thereof—comes from a gap between spending and income. The bigger this gap, the more you can save. The more money you can put away, the more you can use to generate more money.
If you make $100,000 and piss $99,000 of it away, you’re financially behind someone who makes $50,000 and saves $5,000. (Obviously this comparison gets more complicated if they each buy assets that can be sold.)
Rule 4: Divorce time from money.
There’s something the working class doesn’t understand about money. No wonder it’s one of the rules of money I never heard growing up. Heck, I think the middle class barely understands it. As long as time and money are tied together, your income will be limited.
Growing up in a working-class town, we understood money in units of hours.
If someone wanted to express to you just how rich someone was, they would give you their value in time. Jean makes $70/hour as a crane operator. Guy makes $56/hour operating an excavator. These people were the inconceivably rich ones.
Truly wealthy people learn to divorce their time from money. They build systems, machines, that earn them money when you’re not working.
Whether you like him or not, when you buy something on Amazon, Jeff Bezos gets money. Let that sink in. Yes it’s obscene that he’s so wealthy, but you and I made him that rich! (And the company doesn’t pay taxes… which is a different story.)
The person who owns the coffee shop down the street from you makes money when you buy coffee there, whether they’re in the building or on the beach. Michael Jackson’s songs are still making money, long after he died. Apparently, his estate made $74 million in 2015.
Inventors who license their patents make money when a company sells their product. When I lived in London, Ontario, there was an incredibly wealthy man who cruised around in old cars and lived on a beautiful estate.
His father developed the technology that would lead to the birth control pill, and his son lives off the royalties decades later. In the same vein, authors who write books make money when someone buys that book—no matter what they are doing at the time.
The internet has birthed a whole new generation of people who can separate time from money. Youtube stars, Instagram influencers, Twitter thought-leaders, LinkedIn voices, as long as their platforms are monetized in some way, through selling products, marketing for affiliates, or advertising, are making money regardless of whether they’re awake or sleeping.
There were actually some of the same principles when I was doing my graduate work. I won a $100,000 grant once, and the application didn’t take much longer than the one that won me $15,000 the year before. I received that grant no matter how much research I did while I held it.
This is a lesson that should carry with us into the real world. University endowment funds bring in revenue every year without depleting the principle, that’s why they’re such a sustainable funding model (until the market crashes).
You can build your own personal endowment fund too, believe it or not. People who save up huge chunks of money can live off the interest for the rest of their lives. This is separating time from money.
Rule 5: Serve as many people as possible (scale).
The more people you impact, the more money you will make. It’s not a perfect science, but if you can scale the value you offer to people, you’ll make a lot.
I love personal finance, and I followed all the gurus: Dave Ramsey, Suze Orman, and David Bach were my favorites. I digested their wealth principles and tried to implement them in my own life. (I still think they have lots of interesting ideas).
But I finally realized something. None of these financial gurus got rich from following their own rules of money: from putting aside portions of their paycheck every week or from paying down debt fast.
They got rich because they impacted millions of people with their ideas, and their books and seminars have sold around the world.
While their advice may work for some, the financial gurus didn’t get rich from following their own teachings. Instead, they massively leveraged their value and impact by reaching the masses.
It’s not that these strategies don’t work at all. But if you’re 35 years old and have $100,000 in student debt, saving $45 a week in mutual funds isn’t going to make you wealthy.
You’ve got to play some catch-up.
And what better way to catch up than to leverage your tremendous education, brainpower, and ideas into something that can influence lots of people?
Build a platform. Create products. Get vocal and be noticed. Then find a way to make money off it. That’s scale.
The book I wrote is a product. If I were to sell it for $10, and 200 people bought it, I’d have made $2,000 (assuming I keep all $10). It’s something but, since the book took me months to write, it probably wouldn’t be a good value for my time. If 100,000 buy it, I’d have made $1 million—a damned good investment on 6 months of work.
Serve as many people as possible.
Rule 6: Build a Brand.
Potato chips are a big deal in Canada. Every time I travel in the United States, I feel tremendous sympathy for the lack of delicious potato chip flavors there.
One of my favorite flavors is All Dressed. A Canadian brand called President’s Choice (no, we don’t have a president) makes the best All Dressed chips on the market.
Even though there are cheaper versions, I will pay double for these ones.
Given the choice between Coke and Pepsi, I’ll choose Coke every time. When I bought a car last year, I paid an extra $10,000 for a Honda, when I could have gotten a Chevy much cheaper.
Why would I do this?
In food, I know what I like, and the brand signals to me that it’s worth the extra price. When it comes to cars, the Honda brand name signals reliability and longevity, while Chevy makes me think of my first car—a Chevy Cobalt—that broke down frequently and fell apart. When it limped back onto the car lot for a trade in, I swore to myself I’d never buy another Chevy. The extra $10,000 was worth it to me for a Honda.
This is how brands work in a commercial setting, and there are many lessons for building a career with your degree.
I know grads who are leaders in their field, internationally respected outside of academia. One, for example, whose specialty is AI, gets invited to nearly every roundtable across the country.
There are some who are thought leaders, who can consult at a rate of $1,000 a day. They command massive sums wherever they go and are in demand. Organizations clamor to make sure their name is on a report on their area of knowledge, because if X did it, it’s good.
This, my friends, is a weird sort of influencer you can be, and it comes from being a brand.
Rule 7: Learn to do something not a lot of people can do (AKA scarcity).
Not sure if you took an Economics 101 class, but it’s important to remember that things that are needed or desired but not plentiful are valuable.
You know this if you’ve ever tried to hire a plumber or buy a diamond ring. On the other hand, some things are plentiful but not really needed. Yes, I’m sorry to say my Humanities PhD fit into this category. Universities continually produce these degrees which have literally no demand in the marketplace (whether some of the skills are in demand is a different conversation).
A PhD used to be rare, but when overproduction made the PhD itself a commodity held by many it lost scarcity. Plus, the university hacked apart the way it delivers degrees, while simultaneously producing more. Now PhDs have nowhere that they’re really needed. No scarcity.
If you want to be wealth with your degree, either study something in demand (ie. engineering or software development) or else figure out how to make yourself scarce in the marketplace.
How can you do this?
- Create products or services second to none. If you are trying to break into a job, this might mean creating spec- work that shows how good you are.
- Build a brand. Branding is by definition creating scarcity. There are only so many Nike shoes in this world, and if you want them you have to pay. There are lots of talk show hosts, but there’s only one Oprah–and she’s the best. She’s worth more.
- Learn a skill that’s in demand. If you have a useless degree, it might mean learning coding or copywriting, or some other skill that will create your scarcity.
Rule 8: Take control of your labor.
When you sell your time to an employer, they usually get the better value. Do you think they’d keep you around if they didn’t?
They can sell your labor for a premium that makes them money off the difference. If they couldn’t do this, you’d be laid off quickly. You trade your actual labor value for the security of a paycheck and a pension.
And the employer takes the risk–but also gets the reward.
If you’re willing to forego a bit of security to start your own business and take control of your labor, you might do very well. (But don’t let me fool you. It’s a crap ton of work!)
Rule 9: Wealthy people are further along, not different.
We end with one of the final rules of money that my blue-collar friends didn’t get growing up.
I’m not sure where I first heard this from, but Douglas Kruger expresses it really well in some of his talks. He talks about how we often talk about wealthy people like they’re a different species; “Look at how the other half live.”
Wealthy people are not a different species or existing in a different universe that you can never touch. They’re simply further along in their journey.
I talks to PhD students a lot. When you look at a senior professor, you don’t say “Oh wow, they have 100 publications, I could never be like that.” You say, “Someday I’ll have that many publications too.”
You see the differences between the two of you as different waystations along the same journey.
What if we did this with wealthy people?
What if, instead of hating on them or imagining that they got that way because they stepped on people, we saw them as simply further along the journey?
This would be a much healthier way to approach it and would actually help us to realize that we can build wealth.
Learn from wealthy people. Watch to see how they’ve used the rules above and see how those rules apply to your life.
This post is adapted from my book, Doctoring: Building a Life After a PhD—now available on Amazon. Parts of this post initially appeared in “How to be worth $100k with your PhD.“