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The Simple Dollar

401(k) is a step on the path to 'success in the margins'

401(k) savings represent a form of passive, ordinary investing. But 'success in the mainstream' means that you're taking extraordinary actions, above and beyond 401(k) savings, to become financially successful.

By Guest blogger / August 16, 2011

Christine Marcks, President of Prudential Retirement, center, exits the hearing room after delivering her testimony before Departments of Labor and Treasury officials about a year ago in Washington. Marcks stressed the need for a lifetime income option in all 401(k) plans as a way to place more Americans on a secure path through retirement. Another path to financial stability is through riskier investments, writes guest blogger Trent Hamm.

William B. Plowman / AP for Prudential


One of my favorite statements about personal finance is that it all boils down to five simple words.

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Spend less than you earn.

Often, I’ll break this down into two methods you can use to earn more money. You can either increase your earnings (through a better job, better investments, and so on) or you can decrease your spending (through frugality).

The other day, I was having a discussion with an old friend who reads The Simple Dollar. He mentioned that I often repeated that statement and he suggested that I was actually just talking about two different kinds of success and that what differentiated the two types of success was how accessible the action was.

He said something that really left me thinking. “Anyone can get rich,” he said, “but the ability of a lot of people to multiply their earnings is extremely limited. Simply saying ‘earn more’ doesn’t mean a whole lot to an awful lot of people. What you’re telling many of your readers is just to ‘spend less.’ That’s a success, of course, but that’s not very clear from your statement.”

In other words, personal finance success boils down to two main avenues.

Success in the Margins
Simply put, finding financial success in the margins means that you’re finding financial success through ordinary actions. Frugality is, of course, one of these, as are most methods of passive investing (putting money in savings accounts, putting money into 401(k)s, and so on).

These methods bring one to riches, but they require a continuous input of small successes. However, these small successes are available to everyone and aren’t that hard to achieve by themselves. The biggest components needed here are willpower and a good work ethic.

Frugality, as mentioned above, is a key component of this. Seeking out ways to reduce your spending is vital in this process, as it is that reduction in spending that provides the extra money that you’ll use to build your wealth.

Steady income, ideally with a steady increase over time, is another essential part of success in the margins. You have to have enough income coming in that you can cover your bills with a bit left over. Ideally, frugality will serve mostly to increase the size of that “bit left over.” A typical career falls into this category and getting steady raises over a period of time certainly falls into this category.

A savings plan That “bit left over” needs to be saved for the future. You have to have the willpower to save it and the willpower to leave it alone once you do start saving it.

Patience is a necessary component. Because the components here are so straightforward and available to everyone, they don’t magically work overnight.

Anyone can follow this path to financial success. The reason many people decry it as impossible is that they don’t have the patience to plan for the long term and they don’t have the willpower to overcome short-term temptations.

Success in the Mainstream
On the other hand, finding financial success in the mainstream means that you’re finding financial success through extraordinary actions. Think of Bill Gates or Mark Zuckerberg when you think of these things.