Boiled Frog Syndrome - Is it holding you back from becoming a millionaire?

June 14, 2018

Boiled frog syndrome..... It’s one of the reasons I think so many people do not accumulate wealth. Did you know that if you drop a frog into boiling water, it will simply jump out? Logical. However, if you put a frog in a pot of water at room temperature and slowly raise the temperature of the water to the point of boiling, it will stay in the water and die (cook)? How does this relate to building wealth?

 

It’s well documented if you simply put 15% of your income away into an investment (growth mutual fund), you will eventually accumulate a million dollars before you retire. Invest more, reach that mark sooner. Think about when you had no income before graduating high school or college. You knew you could make $30K, 50K, or even 100K per year. Most of us started out around $30K per year (+/-) . We got by. We had a decent place to live. Decent car. Food on the table. Imagine telling your $30K/year self, “Hey, this is your $50K, $75K, or $100K per year self from your future….on your journey to get here, keep living like you make $30K and invest the difference!” You would think “Sure, if I were making $75K, that’s $45K more than I make now, I could easily invest $5K, $10K, even $30K per year.” But guess what? Most don’t. Why? Because we don’t jump from $30K to $75K instantly. It takes time, like it takes the water in the pot time to boil. As our income goes up, so does our spending and lifestyle. We stay in the pot of water. A better house or condo. A bigger, newer car. Better restaurants, more often. More exotic vacations. You get the gist.

 

In my late 20s, I attended a seminar of a very successful entrepreneur. He told how when he started his first business, he was making $50K per year. As his business grew, so did his income. It eventually hit $1 million per year. BUT, he continued living modestly on about $50K per year. He invested the additional income over and above $50K per year.

 

He did this because he knew his product had a life cycle and would eventually plateau and sales would fade away. It did. (This is what pro athletes SHOULD do BTW). However, after about a 5 year successful run with this product, he had accumulated millions. This type of income is obviously the exception to everyday 9-5 jobs but the point is, as your income grows over time continue to live modestly and save/invest the difference. I took note of what he said when I was 27. As my income grew over the years, I’ll be honest I upgraded my lifestyle some but far from all the way to my increased income. I saved and invested the difference.

 

At age 37, on a cold January morning, I remember running the numbers in my excel sheet and realized I had reached a million dollars in net worth. I wasn’t a pro athlete. I didn’t win the lottery. I wasn’t a CEO. I didn’t inherit a dime. My question to you – do want to boil to death (spend, not invest) or do you want to leap out of the pot and become wealthy? Food for thought (and not frog legs)!

 

 

 

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