The-Slight-Edge

180 The Slight Edge
The Slight Edge and Your Finances
Winning is a habit. Unfortunately, so is losing.
— Vince Lombardi
It’s no accident that our exploration of the Slight Edge began with the story
of a penny doubled. The world of finance is one of the easiest places to see,
objectively and logically, the power of the Slight Edge in action. Everyone knows
about the power of compound interest, right?
Wrong. Everyone thinks they know about the power of compound interest;
but most don’t, not really. How many really do understand this power? Five
percent ... the ones on the success curve side of the Slight Edge.
Remember the Pareto Principle as applied to your goals deadlines? “Eighty
percent of everything you do tends to get done in the last twenty percent of the
time available.” There’s a similar law at work in most people’s finances, only
it’s worse. It’s Parkinson’s Law (coined by Prof. Cyril Northcote Parkinson):
“Work expands to fill the time available for its completion.” As applied to
personal finances, it goes like this: Whatever I have, I spend. And for the last few
generations, where easy-to-get consumer credit has flourished like weeds, it has
come to be more like, Whatever I have, I spend a little more!
There is some good news here; recently , the common sense of Slight Edge
personal finances has started making a comeback. The book The Millionaire Next
Door bucked the trend toward flashier, Donald Trump–style how-to finance books
and instead gave example after example of how a cross-section of extraordinarily
ordinary people became wealthy—without inheritance, without high-paying
jobs, without making a killing in the stock market, without any of the usual
“breakthrough” paths to riches, but by doing simple, easy things every day.
The first of its seven rules was, “Always live below your means.” The book
became a runaway best-seller.
When Stanley and Danko’s book came out, my friends started reading it
and calling me up, one by one, and saying, “Hey, Jeff, I just read this book,
and it’s about you!” For years, I kept our family living on $4,000 a month,
no matter how much my income increased, and I wouldn’t let us raise that
monthly threshold until I had a million dollars (after taxes) in the bank. Then
I raised it to $5,000!
“Living below your means” is a classic Slight Edge strategy.
You know where I got this Slight Edge financial philosophy from? Someone
very dear to me: my mom! My mom worked for the majority of her career at a