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Getting Rich on Low Pay

Summary:
The key is high saving. Here’s an amazing story about a worker on Wall Street making ,000 a year and saving ,500 a year in a 401(k) for 12 years. By the end, he was a millionaire. Sam Dogen went to extremes to save that much money in such a short time. And I don’t condone his stealing food from his employer, although that “theft” [he puts it in quotation marks and so I don’t know if it was really theft] saved him only a small amount of money. But what I always take from such stories is that if you really start to focus on what you spend and make some careful decisions, you can save a lot. Let’s say, for example, that you really do want your own room and you split a one-bedroom with a friend, paying ,300 a month (remember that this was in 2000) rather than

Topics:
David Henderson considers the following as important: , , ,

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Getting Rich on Low Pay

The key is high saving.

Here’s an amazing story about a worker on Wall Street making $40,000 a year and saving $10,500 a year in a 401(k) for 12 years. By the end, he was a millionaire.

Sam Dogen went to extremes to save that much money in such a short time. And I don’t condone his stealing food from his employer, although that “theft” [he puts it in quotation marks and so I don’t know if it was really theft] saved him only a small amount of money.

But what I always take from such stories is that if you really start to focus on what you spend and make some careful decisions, you can save a lot. Let’s say, for example, that you really do want your own room and you split a one-bedroom with a friend, paying $1,300 a month (remember that this was in 2000) rather than splitting a studio and paying $900 a month, your annual saving would have been about $4,500. (I’m also taking into account the reduced tax advantage from saving less in a 401(k)).

Here’s my version of what Sam did. Living in high-tax New York state in 1975-76 and making $20,000 gross at the University of Rochester over 12 months, I saved $9,300.

David Henderson
David Henderson is a British economist. He was the Head of the Economics and Statistics Department at the OECD in 1984–1992. Before that he worked as an academic economist in Britain, first at Oxford (Fellow of Lincoln College) and later at University College London (Professor of Economics, 1975–1983); as a British civil servant (first as an Economic Advisor in HM Treasury, and later as Chief Economist in the Ministry of Aviation); and as a staff member of the World Bank (1969–1975). In 1985 he gave the BBC Reith Lectures, which were published in the book Innocence and Design: The Influence of Economic Ideas on Policy (Blackwell, 1986).

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