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On today's podcast, we continue our Financial Goals That You Should Set series. I'm laying out for you a series of simple, tangible financial goals that each and every person should consider setting for himself or herself, which, if you set these goals, they will move you consistently, and in some cases, dramatically towards your goals.

I'm making a special focus to make these things meaningful and yet doable. I want them to be accessible to all people, especially the young, especially those who aren't making a lot of money yet. I want you to systematically move down the pathway of wealth. The first goal, goal number one, was simply get a job.

The second goal was live on half your income, spend half, save half. So far, by the way, that's probably the hardest one. But as I emphasized in that podcast, it's something that you can work towards systematically in a variety of different ways, even if your expenses were already high.

Goal three was give away 10% of your income. And today, goal four, I want you to begin or build, from where you are, a job or a career that has potential in the fullness of time to help you to become a top 20% earner. I want you to build a plan that will eventually, could eventually, in the fullness of time, help you to be in the top 20% of income earners within your local area.

Now, I'm going to define that very carefully and specifically, and I'll show you why this is such a big deal. But I actually want to begin with a slightly smaller goal. As we do that, though, I want to begin by talking about the concept of 80/20 principle or the Pareto principle.

Pareto principle takes its name from, I think, an Italian guy many years ago, who, as the lore goes, he was out in his garden studying his garden's pea plants. And he discovered that about 20% of his plants were responsible for 80% of his garden's pea production in a particular year.

And so he started to count this and observe this. And he discovered that this principle held true year after year. And he started studying other factors, other kinds of examples, and found that it holds true in many places. Over the many years since this was first discovered, we continue to run into this basic principle of the universe.

I don't know why it is. I'm not sure if anyone knows why it is. But it's just something that seems to accurately describe much of human life. Not perfectly, but it's pretty good. So you can pretty well guess, if you go into just about any company, you can pretty well guess that 20% of that company's employees account for 80% of the profits of that particular company's results.

Or if you go into a company's customer and you try to figure out who's responsible for the complaints, you can discover that about 20% of the company's customers are responsible for about 80% of the complaints that the customer receives. And it's just a principle that seems to hold true everywhere we look.

And it also seems to hold true with regard to income and wealth. If you go in a society and you look around, you'll find that about 20% of people in just about any society hold about 80% of that society's wealth. And if you look at income earners, 20% of a society, if the income earners account for about 80% of the society's wealth.

In fact, we can look at this with regard to things like taxes. 20% of the taxpayers in the United States of America pay about 80% of the country's taxes. Now, there's not a precise number. It might be 25, 75. It might be 30, 70, 15, 85. It's just a basic truism that it holds out to be about 20%, 80%.

Now what's remarkable is that this is a truism that seems to hold true even further. So let's go back to wealth as an example. The top 20% of wealthy people in a society hold about 80% of that society's wealth. Okay, so far so good. But what's interesting is within that top 20%, you actually wind up with the top 20% of the top 20% or the top 4% hold about 80% of the 80%.

So the top 4% of a society should hold about 64% of the society's wealth. And then the top 20% of the top 4% should hold about 80% of the 80% of the 80%. So 80% of 64% winds up being about 51%, which is why in most societies, the top 1% seem to hold about 50% of the society's wealth.

And there's going to be slight variations of that, but it somewhat holds true. So we can look at society in this way and we can look around and try to think about, well, are these static categories or are these movable? Do these change? And what is interesting is while this does describe, especially with wealth, somewhat statically what various people hold in terms of wealth, it's not the case with income.

We know from US income tax data over the years that while we certainly know that the top 20% of taxpayers pay 80% of the taxes, people actually wander in and out of that top 20% consistently. And what's more important is simply if we look around, we can understand that while it may not be easy to get into the top 20%, it's extremely doable to get into the top 20%.

That there are many ways to do that. So I now want to talk about the actual numbers, but in doing so, I want to define a couple of statistical terms for those who may be unfamiliar. We're talking about averages here, and there are a variety of ways that we discuss averages.

The most common way, when you first learn to average numbers together when you were in elementary school, was to take what we call the mean. The mean is the arithmetic average of a data set. So you take all the different numbers, let's say you have five different numbers and you add them all up together and you divide by five, that gives you the mean or the average.

Usually in the English language, when we say what's the average, we usually refer to the mean statistical term to mean average. Now there are other terms that could also be used under the idea of average. The most common ones would be the median and the mode. The median is the middle value when a data set is ordered across in range from lowest to highest.

And then the mode is the most frequently occurring value. For our purposes, the median wage is usually what we are going to talk about and the basic average that we're going to draw everything from because it's the most useful. Let me give you an example. Let's say that we have a sample set of five people.

In this five people, we have earner number one earns $15,000, person number two earns $47,000, person three $58,000, person four $72,000, and person five $489,000. So we have one very low earner, one extremely high earner, and then three people in that middle space. If you take the mean average of those five numbers, $15,000, $47,000, $58,000, $72,000, and $489,000, then your mean average would be $136,200.

So you can see that if I described to you that the average earnings of these five people is $136,000, while that is correct and true, it wouldn't accurately represent how the group would feel because you would have four people who all felt pretty poor, and you would have one person who could say, "All right, that makes sense." If we take the median calculation, we just simply take the middle number.

Again, our five numbers were at $15,000, $47,000, $58,000, $72,000, and $489,000, so our median number is $58,000. That would feel if I said the average of this group or the median is about $58,000, then most people in that group would feel, "All right, that makes a lot of sense." The outlier, the only person who would say, "Wow," is the very high earner.

The idea here is this is the usefulness of talking about median wages as they describe fairly accurately a society because they diminish the impact of the very low numbers and the very high numbers, and they concentrate us on the middle numbers. So whenever we talk about wages or earnings, we're always going to use a median number because that'll reflect on, we know that 50% of the population earns more than this and 50% of the population earns less than this.

So currently, as I understand it, for the first quarter of 2024, the median wages in the United States are just under $60,000, $59,228, something like that. Middle number is $60,000. I'm just going to round that to $60,000. So back to your financial goals. The first thing I would encourage you to do is to calculate your annual wages against the median number and say, "Am I higher than $60,000 or lower than $60,000?" If your annual wages are lower than $60,000, you now know that you are in the bottom half of society with regard to overall earnings.

If your wages are higher than $60,000, then you know that you're in the top half of society with regard to earnings. This is the first goal that you should have. The very first goal should be to go from the bottom half to the top half. You should calculate your own achievement of that goal based upon the actual data that the government produces of actual earnings of real workers.

The reason for this is it's difficult to figure out how you're doing when you're simply comparing yourself to other people without actually knowing the details of their life. If you're sitting around and looking at other people's consumption patterns or how much money other people seem or don't seem to have, and you're trying to compare yourself to them, then you will have a hard time knowing how you're doing because everyone handles money differently.

But you can be confident that if you are in the top half of income earners, then while that doesn't mean your life is necessarily going to be easy, you can be confident that you're going to be able to do just fine. You're going to be able to live. You're not going to starve this month.

Now, I said your goal should be to go from the bottom half of society to the top half of society with regard to income. Why can I state that goal confidently and say that everybody should set this? After all, we're not all above average. That is true. We're not all above average.

Most of us are probably pretty average. But we're talking here about behavior. And if we look at that number of $60,000, what I would say to you is almost anyone who's not uniquely handicapped in some way, especially disabled, facing some unique situationally difficult thing, almost anyone can cross from the bottom half of society's earnings to the top half of society's earnings just simply by hard work.

And by hard work, I mean hard and long work. Let's back into the numbers. Let's assume we're trying to get to $60,000 of annual earnings. So we divide $60,000 by 52 weeks and we get a weekly earnings amount of $1,153. Let's assume that you work a lot. You work 80 hours a week.

You have two jobs, which is doable as long as you're working six or seven days a week. Not easy, but it's doable. That means that your average earnings need to be $14.42 an hour. So if your hourly rate is $14.42 an hour, which is very close to the starting wage in many kind of leading economies.

If you're in a small town, a very rural area, low cost of living area, then you're not going to start at $14 an hour. But if you're down in most places, I see lots of signs about $15 just starting wage at just random straightforward jobs, many times $12, $11.

Even though federal minimum wage in the United States is $7.25, that's not really a relevant number anymore. It's just a number that happens to be out there. Real starting wages are probably pretty close to $15 an hour in most leading sectors of the market. So technically, you could cross over that number in earnings based upon working two jobs.

I don't want you to work two jobs. So I want you to set, first of all, an hourly goal that would allow you to earn one job and cross over that. So if you don't have any earnings right now, or you have your first job because you've accomplished goal number one, I want you to take $60,000 per year.

I want you to divide that by 52 weeks per year. So that's again, $1,153 per week and divide that by $40 per hour. And that gives you an hourly wage of $28.84. So my goal for you is that to begin with, you have a job potential or career potential that could lead to your earning $30 an hour.

Notice that I'm focusing on potential. Notice that I'm emphasizing that you should see a pathway forward to this. The idea is you may not be earning $30 per hour today. You may be earning $12 per hour, and that's fine. But what you need to do is you need to take the job that you're doing right now, the company that you're working for right now, the career or industry that you're engaged in, and you need to look around and you need to figure out, are there people who started where I am right now and who are now earning $30 an hour or more?

Top half wages versus bottom half wages. If you can see those people, and if you can see a pathway from where you are right now to where you would be in the future, and you could see that if I keep working this and I show up on time and I do what I'm told and I keep my nose out of trouble and I get this certification or pass these training courses or whatever it is that I need to do, develop these skills, then I could be earning $30 an hour.

You know you're on the right track. And this is why I want you to set this goal, because I need you to be thinking about the things that you would be doing towards that goal. So many people, especially young people, take a job and they say, "Hey, I'm doing great.

After all, I'm young. I'm single. I'm making $16 an hour. This is fantastic. Life is great. I can spend with abandon. I can live well. I'm doing great." But they may be working in something where there is no future potential. And then you reach that adulting stage of life where you want to get married, you want to start having children, and you face adult-level expenses, and yet you don't have an adult-level income.

You're kind of stuck in that other world. So you need to be setting a goal of moving to the top half of wages versus the bottom half of wages. Because as long as you're in the top half of wages, while it may not be that you're getting rich fast and you have all kinds of disposable extra money, you can still live an adult lifestyle.

You're going to be frugal, but you can still do fine. You're going to be doing well. And so you need to have a plan, have a design, have a scheme that's going to get you into the top half of income earners. I could sit here and off the top of my head list a dozen jobs or careers that are available to practically anyone, anyone who has few felonies, if any, anyone who could pass a drug test, anyone who's physically able and able to show up and work hard during the time that he's on the clock that can get you into the top 50%.

You can get to the top 50% just by hard work and being reasonably sociable, reasonably dependable, reasonably reliable. But this should be your first goal. Top 50%. Get over the median wage threshold and have a plan to do that. And ideally, I would love it if your plan were no more than five years.

I can see this. There's not an 18-year-old out there or a 16-year-old out there that I can't have you over the median wage with some plan by the age of 20. It's totally doable in, well, excuse me, 18 to 20 is fewer than the five years I said. Four or five years, five years.

Give me 18 to 23, I can have you over the median wage. Give me 16 to 21, we can do that. There's lots of ways to do that. Even if you're not especially smart, especially gifted, especially good looking, whatever the special things are, you can do this with hard work and with basic character.

Now, most of my audience is past that. And I want to mention that, though, because this would be the first goal. Top bottom half to top half. But I really do now want to focus you on the top 20%. And I want you to have career potential to get into the top 20%.

So what does that mean? Well, in the United States, to get into the top 20% of income earners in the United States, the number would be about $130,500. We're just going to call it 130,000, slightly more, $130,000 per year. So the real goal that after you've crossed from the bottom to the top, the real goal that I want you to set is $130,000 per year.

Let's break that down into weekly wages. First, $130,000 divided by 52 weeks per year means a weekly wage of $2,500 per week. If we're going to divide that into a 40-hour work week, that's an hourly rate of $62 per hour. This is a goal that everybody should set. It's not a goal that everybody can achieve within a very short period of time.

I would say many people can achieve this fairly quickly. If you combine hard work with knowledge, study, skill acquisition, credentialization, good connections, moving for work where work is needed, you can absolutely achieve this. But when you get to the top 20%, it's very hard to get into the top 20% by pure physical effort.

There are many, many people who work hard at hard demanding jobs that will never be able to get into the top 20%. You can get to the top 50% by physically demanding effort, many hours. It's hard to get to the top 20%. You have to develop skills that the marketplace values.

And that's why I want you to set this goal. I want you to start thinking about developing economically valuable skills, specific skills and abilities that the market is willing to pay you for. These are skills and abilities that you're going to have to pay for first in their acquisition.

There are three basic pathways that you can use to acquire the kinds of skills and abilities that are going to lead you to being able to get into the top 20%. Or better than saying that three pathways, although there are, there's basically three gates. And you have to go through some of these gates, but you can't get there without going through the gate.

So the first pathway or the first gate that you have to go through is the pathway of experience. Experience can be one on the job. There are many people in the world, many craftsmen who started off as a junior apprentice and went to work and showed up every single day and they did their job.

They did what their boss told them and 30 years on into their career, they're now a top 20% earner. You can find this all over in the skilled trades of many, many people who have gone through this pathway. Earning $130,000 a year in the skilled trades is not common, but it's also not uncommon for those who have 30 years of experience.

And so you can get to the top 20% the long way through on-the-job experience. Time in most things will lead to seniority, which affects pay scale. It leads to advancement in rank just by the fact that this guy has been showing up at the factory every single day. He's got to build those skills.

It does lead to top 20% earnings. So if you see a pathway in your current career that if I just keep doing this and I do this for 30 years, I can get into the top 20%, then that's good. That's okay. Now the challenge is the 30 years, because a lot of times that 30 years means that the money comes when it's not quite as useful as it would have been if it had come faster.

So you get out and you start your job at 20 years old when you get out of high school and get a job and you're a union worker and there's certainly with overtime and with full experience and cost of living raises, I can get into that top 20% when I'm 50 years old.

Yeah, but you're raising your children in your 30s and your 40s when that's when you need more money. And it's okay because even if you can, like we said, if you're top median, excuse me, in the top 50%, then you can afford to raise your children. And then at the back of your career, when you're 50 years old and you're earning top 20% wages, as long as you keep your expenses down, you'll be able to fill up your retirement accounts.

You'll be able to build wealth very quickly. People on this pathway and most pathways tend to build a lot of wealth quickly in their 50s because they've gotten their expensive years behind them and just through pure experience, they're at the top edge of the earning scale. So that's the first pathway that you can go down is the gate of experience, long-time perspective.

Now, the second gate that you can go through is the gate of education. And let me quickly tell you the third gate because I'm going to contrast the second and the third. The second gate of education, I mean, based upon what you know, and you can know that in any way.

Gate number three is paying for education and credentialization. The idea is education is something that you can gain usually for time and effort invested, but not for money. Gate number three includes education, but here I'm talking about paying for education with money. So you have to have money to go through gate number three.

Let's go back to gate number two. If you want to speed up the process of the long-time horizon, you need to educate yourself in skills that are going to be useful to the marketplace, and you need to do that fairly quickly. This requires effort. So this is the gate of effort.

Gate number one is the gate of time. Gate number two is the gate of effort. Effort is something that is available to all people, but that most people are not willing to do. Today, educational resources are basically free in the world. Most things you need to know to do something well are available free on the internet.

If they're not free on the internet, they're probably available free at the library. With those two resources, you can find any bit of information that you need. So you can find the books, you can find the tutorials, you can find the classes, you can find the instructions, you can find those things, and you can exercise effort in order to build skills that are going to make you better, faster, more effective.

And so this gate of effort is something that can help you to not have to just rely on gate number one of time and move you faster. In any business or career, there are always people who go up the pay scale faster because they build the necessary knowledge and skills to go faster.

So that's what you want to push on is push, if at all possible, on effort. Now, the third gate is the gate of money. Money is where you spend money in order to acquire the skills or the access that leads to the long-term, much higher earnings. So money usually, at this stage of your career, usually is spent most effectively on tuition payments to buy classes of some kind.

Those classes can be blue collar, it can be welding classes and certification for plumbing work, it could be taking exams so that you can get certain licenses. Those classes will help you to move forward, but you have to have the money for those classes. The more common expression is some form of formal college degree.

Formal college degree is basically a pay gate. If you can pay the money for it and put forth the effort to get through it, then you'll come out and the pathway into the top 20% for most college graduates is much straighter than it is for those who aren't college graduates.

So this is why I put step two or goal two first. Somebody who gets a job has income. Somebody who is spending 50% of his income has savings. And now those savings can be used to purchase the kinds of classes and credentials that will help you to move faster towards your goal of getting into the top 20% of earners.

And so that should be your goal. You set the goal of saying, I want to earn $130,000 per year under current numbers in the United States, or I want to earn $62 an hour. So what kinds of jobs or careers do I know of that are around me that could, in the fullness of time, lead me to me being in the top 20% of earners?

By the way, you get to define the fullness of time. I would say doing it in a decade should be very reasonable. So if you're 20 years old and you're looking at age 30, 10 years, you can do a lot. You can put forth a lot of effort. You got 10 years of experience.

And if you can pay money to get yourself the necessary credentials and knowledge that will help you move faster, you can do it in 10 years. So 10 years is, I think, a very reasonable goal for a lot of people. If you are a person of less capacity or less self-confidence, do it in 15 years.

Totally fine. But you're going to be happy if you wake up at 35 or 45 and you're in the top 20%. That's a really good goal. So set that goal and create a pathway for yourself to it. Anybody with a little bit of motivation, a little bit of hard work, can lay out a plan to get into the top 20% of earners.

Now, as I start to close, I want to simply encourage you that once you reach that goal, the top 20%, once you reach that goal, then I think it's reasonable to set one more goal, to try to be in the top 4% of earners. I don't think this is as open to as many people as I would like it to be.

I have a never-ending confidence and belief in you and your ability to eventually achieve this. But I also acknowledge that statistically speaking, not everybody or most people can't be in the top 4%. Just doesn't happen that way. That's not how the numbers work. But I think that by setting a goal of 4%, that it's going to stimulate your creativity.

Under current numbers, to be the top 4% of income earners in the United States, you need an annual income of about $250,000. $250,000 gets you in the top 4%. If you have a high degree of self-confidence, then make some kind of career plan that allows you to have the potential of earning top 4% numbers or $250,000 a year, again, in the fullness of time.

Have a 20-year career plan, a 30-year career plan that gets you to top 4%. This won't be available to everybody, but it really is doable for most people with planning. If you have normal or above average, again, work ethic, intelligence, self-discipline, and self-confidence, this 4%, top 4% is largely a matter of a good plan and a disciplined focus on the plan over time.

It's not magic. When we get to the very top numbers, the top 1%, the top half a percent, the top 0.1%, then achieving those kinds of numbers requires unusual synchronicity of events. It requires you to be in the right career at the right time when external market conditions really make it pay off.

It requires your company to be the one company out of 1,000 competitors that hits, and all your competitors were worthy and effective, but your company was the one that got bought out for a bazillion dollars. So the very highest level of results are hard to predict. And because they're hard to predict, I can't tell you how to do them.

You can work towards them, but I can't just say, "I can't sit down and make a plan for everyone." But when we're at the $250,000 number, again, that top 4% number, we're still within the realm where this is totally plannable. It doesn't have to be serendipitous. It's totally plannable.

It's choosing a good career that produces work that is highly valued in the marketplace. It is a matter of you engaging in that, passing all of the gates necessary to establish yourself in that career, and then sticking to it for the sufficient amount of time until you just simply make it step by step.

So you can do this with predictability at the top 4%. Top 1% number of earners in the United States is $600,000 currently, about $600,000, and then from there on up. I would say that maybe for significantly above average, people of significantly above average ability, you can just plan your way to top 1%.

And so keep planning your way as far as you can, and then prepare yourself to take advantage of market opportunity when it presents yourself. But that's about as high as you could probably plan without relying on taking advantage of all of the breaks that you're offered in the fullness of time.

So let's go back and review. First and foremost, you had to get a job. Second, I want you to spend half your income and control your expenses so that you have money available. And what I was really earmarking is goal three of giving money away. And once you have that money available to buy your way into a pathway that allows you to earn a top 20% income.

And so that's why it's so important that from the very beginning, you spend half, save half, so that you can buy your way onto the fast track. And here in today's goal, begin with getting from bottom half to top half, doable for anybody with those conditions that I described.

But create a plan that in the fullness of time moves you into the top 20%. And then once you reach that target, the top 20% of the top 20% or the top 4%. When you reach this, you will know many people who are making a lot more than you.

And you will look around and you'll say, I'm just dissatisfied because so and so are in so much more than I do. And I wish I was doing what that person does. That's normal, because you're comparing yourself to your peers. But don't ever forget that you are in the very rarefied air at the top of society.

And so you'll start to take it for granted. Everyone does. Don't take it for granted. And that's one final hope that I had for today's show is that to accomplish the idea of simply saying, don't take this stuff for granted. Focus on getting yourself to the top levels and appreciate that once I'm there, life is good.

Now, one final comment. Go back. Let's assume that you make top 20%. Why this number? Do you remember what I said about spend half, save half? The reason it's so important to focus on getting into the top 20% is that you will still be able to live well and save half your income.

And the saving half your income is the fast track to enormous wealth. Remember, median wages, bottom 50%, top 50% in the United States, about $60,000. At $60,000, if you have children and a few just normal deductions, you don't pay much tax in the United States. If you're earning $130,000 per year, you're going to be paying some tax now.

But assume that you spend half, save half. $130,000 a year of earnings, you're going to spend $65,000 a year, save $65,000. But of course, there's going to be some taxes. Call it $10,000 of tax. Now, you're to the point where you can spend $60,000 and you can save $60,000.

And since we know that median wages are about $60,000, then you're going to be in a wonderful position to live a normal lifestyle, to be able to afford all of the normal things that most people in society can afford and still save 50% of your income. That's what's so powerful about targeting the top 20%.

That's what's so powerful about always focusing on increasing your income. As you do this systematically, it allows you to save a lot and live well. Now, if you could go to that final level, that top 4%, well, it's a top 4% income earner, about $250,000. We're going to have some taxes, so pull off $20,000, $30,000 of taxes.

You're left with a lifestyle. If you save half, spend half, you're left with the lifestyle of a top 20% consumer. $250,000 divided by two, $125,000 to spending, $225,000 towards saving and giving. That leaves us with $125,000 minus taxes, pull off $20,000 for taxes, we've got $105,000. We're similar in lifestyle to just a standard top 20% earner who's not really saving much money.

When you get to the top 20%, those people save money. You're living at a top 20% lifestyle, but you're saving 50% of your income. That is the fast track that allows you to, as I stated before, be financially independent within 20 years or so, and yet also be able to dramatically impact the world.

I hope that this is as inspiring to you as it always has been to me. Take this as a series of steps and map out a pathway that works for you based upon where you live, the opportunities that are available to you, the culture that you're involved in, the education that you have, the opportunities that you can see in front of you.

First goal, get over the median wage, get into the top 50%. Next, the real goal, get into the top 20%. Everyone can do that who's listening to my voice. Then the stretch goal, get into the top 20% of the top 20% or the top 4%. That's the sweet spot.

If you can go higher, go higher, but that's the sweet spot. Give yourself as long as you need, 20 years is perfectly fine, 30 years is okay, but make certain that you're working in a job or a career that can result in you being at that earning capacity in the fullness of time.

It is enormously frustrating for an intelligent, capable man to be working in a job that is simply capped, that he'll never make a lot more money because the job that he chose, the career that he chose is capped at this relatively modest number. You can't get there overnight, but what you can do is make certain that you're working in a job or a career where you can see that pathway of advancement.

If you can see that pathway of advancement and you can know that in the fullness of time, I can be at top 20 or top 4%, then you're going to be confident that you can achieve all of your other goals. That's why this is such a powerful goal. Thank you for listening.

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