None of us wakes up each morning hoping to shrink and shrivel! We all hunger after advancement and ascendancy. But do we genuinely know how to succeed?
We all wish to move up in life but often don’t know how to do so. Thankfully, a profound conclusion drawn over a 50-year career by Harvard University academic, the late Edward C. Banfield, on economic mobility gives us the answer.
Banfield advised three US Presidents: The nefarious Richard Nixon, the moderate Gerald Ford, and the charismatic Ronald Reagan. In 1970 Banfield wrote a book entitled The Unheavenly City. In it he distilled the results of massive demographic research to identify the core reason some people beat the odds to succeed in life while most others don’t.
I learnt about Banfield’s work from author and professional speaker, Brian Tracy. In his 2016 book Get Smart! — How to Think and Act Like the Most Successful and Highest-Paid People in Every Field, Tracy explained that what Banfield discovered “flew in the face of what many people wanted to believe, that poverty and welfare were largely inflicted on innocent victims who had no choice or control over what had happened to them”.
While that narrative appeals to closet socialists, Banfield found the true reason for personal success and failure hinges on one internal tendency; a predisposition that can be altered through proactive choice.
In my opinion, Banfield’s discovery explains the relative development rate of every country in the 49 years since The Unheavenly City was published because a country’s national wealth is a function of its citizens’ aggregate well-being and personal wealth.
In Get Smart! Tracy states: “In diagnosing the economic success or failure of individuals, he (Banfield) concluded that ‘time perspective’ was the overwhelmingly important factor.”
SOCIOECONOMIC LADDER
For most of us, our place in the socioeconomic ladder was determined by our parents’ economic standing throughout our childhood. Of course everyone would love to move up that ladder yet most fail to do so. They either stay at the same level or through a combination of bad breaks and bad habits slide down a rung or two.
Our goal, yours and mine, should be to harness Banfield’s research and proactively extend our natural time perspective to move UP in life.
Banfield identified seven socioeconomic strata:
1. Lower-lower class;
2. Upper-lower class;
3. Lower-middle class;
4. Middle-middle class;
5. Upper-middle class;
6. Lower-upper class; and
7. Upper-upper class.
For Malaysia, to the best of my knowledge, there are no official income demarcations for those seven socioeconomic slices. Nonetheless, I'm sure you've read a lot about the need for sound government policies to help the so-called B40 or bottom 40 per cent of Malaysians who have a median household income of RM3000 a month.
I believe the greatest help that can be extended to this poorer-than-average slice of our country’s population is through financial literacy and English proficiency programmes.
If you’re wondering about income levels associated with various socioeconomic slices in Malaysia today, I’ll share my estimates. But please note I’m guessing based on my past experience as a business journalist and investment analyst, and my present work as a licensed financial planner. (It is my hope that academics at our public and private universities will pick up the threads of my thoughts to conduct formal studies to pinpoint where exactly, in terms of the seven income bands denominated in RM, one demographic slice ends and another begins.)
I will not provide guesses for all seven bands but I do estimate that households in the lower-lower class struggle to get by on less than RM300 a month; while entry into the middle-middle class kicks in at monthly income levels of RM8000 a month, upper-middle class at RM25000 a month, lower-upper class at RM100,000 a month, and upper-upper class at perhaps RM500,000 a month.
Many will disagree with my guesses. That’s wonderful! I hope that disagreement, especially in academia and within economic think-tanks will spark robust research projects that give us all more accurate income demarcations in Malaysia for all seven of Banfield’s illuminating slices.
PLANNING FOR THE FUTURE
Tracy writes: “(For the) lower-lower class, the time perspective was often only a few hours, or minutes, such as in the case of the hopeless alcoholic or drug addict, who thinks only about the next drink or dose.”
In contrast, according to Tracy and Banfield, those who inhabit the higher echelons of society and who are heading even higher are “intensely future oriented”.
So I recommend you focus on longer planning horizons rather than shorter ones. Toward that end, an effective first step would be to initiate a long-term savings and investment portfolio.
For help as you ascend your ladder reach out to experts like bankers, tax planners, fund managers, licensed financial planners, financial advisers and trusted unit trust consultants for specific guidance.
To begin your vertical journey choose today to exercise delayed gratification so your gradually lengthening time perspective leads you to (1) spend less than you earn; (2) save and invest the difference; (3) do it for a long time; and (4) then — ideally — move your family up one, two or more rungs during the remaining decades of your active working career.
In next week’s column I’ll suggest some non-monetary contributing factors to developing a longer time perspective.
© 2019 Rajen Devadason
Rajen Devadason, CFP, is a Licensed Financial Planner, professional speaker and author. Read his free articles at www.FreeCoolArticles.com; he may be connected with on LinkedIn at www.linkedin.com/in/rajendevadason, or via rajen@RajenDevadason.com You may follow him on Twitter @RajenDevadason