How much does luck play in creating wealth?

[2moretrees]

How much does luck play when it comes to creating wealth? Some friends say that luck has nothing to do with it and it is all a matter of hard work while others say that those born into certain families have more opportunities and resources making it easier for them to create wealth. I'm curious what everyone thinks?

[cicy33]

I think both. Definitely if you are born into a family with means it helps. It is easier to make money when you have money but also hard work can create the money to make more money.

[nim3]

I think luck can help abit but hard work is the main way to gain wealth.

[Broken Arrow]

Luck plays a role....

But you can't count on luck.

[jIM_Ohio]

I am not lucky, I am smart.

I set aside close to 16% of what we make each month. In 6 years that means we have one years pay set aside. In 12 years that is 2 years pay.

Actually I am in year 10.7, and have 3 years pay in the bank, so I guess compounding really works.

If someone wants to "get rich quick", luck has more than anything to do with that.

If someone wants to "get rich slow", no luck is needed, just be smart.

[disneysteve]

How much does luck play when it comes to creating wealth? Some friends say that luck has nothing to do with it and it is all a matter of hard work while others say that those born into certain families have more opportunities and resources making it easier for them to create wealth. I'm curious what everyone thinks?

I definitely think the family and circumstances into which you are born make a big difference. Sure, there are stories of people who grew up poor and escaped poverty to become very successful, but it is certainly much harder to do that than to be born into middle or upper class and succeed from there.

I work in a poor area and I see the culture of poverty that exists. The lack of parental support and involvment with the kids, the lower quality of education available, the high crime rate, the drug abuse, the domestic abuse, the poor nutrition, etc. It is tough to rise above all of that.

There is a big mental/psychological factor to all of it, I think. If everyone around you is poor, living on welfare, smoking, drinking, doing drugs, getting into fights, etc., that's what you grow up knowing.

[jIM_Ohio]

I definitely think the family and circumstances into which you are born make a big difference. Sure, there are stories of people who grew up poor and escaped poverty to become very successful, but it is certainly much harder to do that than to be born into middle or upper class and succeed from there.

I work in a poor area and I see the culture of poverty that exists. The lack of parental support and involvment with the kids, the lower quality of education available, the high crime rate, the drug abuse, the domestic abuse, the poor nutrition, etc. It is tough to rise above all of that.

There is a big mental/psychological factor to all of it, I think. If everyone around you is poor, living on welfare, smoking, drinking, doing drugs, getting into fights, etc., that's what you grow up knowing.

While I agree surroundings factor in, they can also polarize. My family was terrible growing up. Verbally abusive and really bad with money.

Yet I figured out how to overcome it.

I won't buy luck as a factor. If you work hard others will consider you lucky.

[aida2003]

I am not lucky, I am smart.

I set aside close to 16% of what we make each month. In 6 years that means we have one years pay set aside. In 12 years that is 2 years pay.

Actually I am in year 10.7, and have 3 years pay in the bank, so I guess compounding really works.

For my curiosity:
Are your 3 years of pay pretax (gross income) or net take home pay?
401k only or have all your accounts (401k, RothIRA, taxable) worked for this 'pay'?
Is anything of your DW included?

[jIM_Ohio]

40k roth
60 k rollover from 401k
40k current 401k
20k in wife's roth and 401k and rollover combined
12k in CDs (taxable)

I have paid taxes on about 1/3 of the money and will be slowly converting rollovers to Roths over next 20-50 years. Will only pay taxes at 15% bracket level, so I have a high standard.

This is more than 3X yearly expenses right now. And not quite 2X take home pay and only about 1.4X gross pay.

[sweeps]

How much does luck play when it comes to creating wealth? Some friends say that luck has nothing to do with it and it is all a matter of hard work while others say that those born into certain families have more opportunities and resources making it easier for them to create wealth. I'm curious what everyone thinks?

This assumes there is such a thing as free will and random occurrence. What if our actions have already been laid out in advance? I could have been predestined since the beginning of time to write this post.

[MonkeyMama]

Actually, I am in the middle. I think hard work you can do anything. I get that from my dad. He grew up in poverty (his parents didn't even finish grade school. HE was first generation college. Today he is doing quite well - on the verge of upper middle class).

I think in his case hard work and smarts got him where he is more than luck.

But by the same token I think most people take way too much for granted. A bout of bad luck can push you considerably backwards financially.

Likewise, sudden death or illness can wreak havoc on the best laid plans. OR just changes in industry or the economy. I Feel extremely lucky not to have suffered those kinds of setbacks. I think it is harder to deal with those when young. If you have time to build assets and prepare for setbacks is one thing. But it can really knock you off your feet if not prepared. I try to be prepared best as I Can (prepare for the worst; hope for the best). But I try to imagine what we would do if we lost our house if I became disabled. We're insured, but I don't find overall the insurance offered to us is terribly adequate. You hear too many stories of denied claims as well. For all you do right there is always going to be an element of luck.

We've had a lot of brushes with bad luck in the past. IT really doesn't take much for financial ruin. Thinking past lawsuits against family and needing more medical care than coverage. They worked out okay for our family (good luck I guess, in the end) but both of our parents have been on the brink of financial ruin with these kinds of circumstances. They are the people that did everything right. IT's very humbling to me.

[Caoineag]

I agree with Monkeymama. I worked hard to get my education even though I came from poverty but it was luck that I had parents that valued education and that I am intelligent enough to take advantage of the opportunities available to me.

[LivingAlmostLarge]

It plays a role and so does hard work. Does anyone expect to get married and then divorced with 2 kids? I say because we have a 50% divorce rate yet it is a financial situation which can devestate both parties. And while you have to work at a marriage, honestly for some people I know, they just grew apart.

They got married too young and when they were 35 (15 years later) suddenly the people they were when they got married had changed. You are lucky if it all works out and you grew together, but what if you have grown so different?

In that sense it can play a slight role. Or the luck of meeting someone at 20 versus getting married at 35 and spending say mucho $$$ on trying to get pregnant or adopt because you weren't fortunate to meet someone early enough to have kids at a reasonable age instead of 40.

[Sallyr70]

I think that someone might get lucky enough to fall into a line of work that pays a good salary, but that doesn't mean they will build wealth if they spend all (or more) than they earn.

Example: my SO, who is a very talented softwear engineer. He struggled to put himself through college and excelled in all the engineering/ math classes and moved up quickly in that field, making very good money. Luckily, he is also frugal and knows to save a lot of his money and invest it wisely. Other coworkers bought huge houses, sports cars, etc. and some ended up laid off...

[Broken Arrow]

A lot of factors in life are beyond our control. Some have already been listed. For that, I account most of it to luck....

However, it doesn't mean that bad situations can not be surmounted or at least mitigated. For that, skill and preparation is required. Luck can sometimes get you out of jams too... but skill and preparation is far more reliable.

Hence, I stand by my original assertion.