Whether we like to admit it or not, luck plays a big role in our success in life.
Where you’re born, when you’re born, your ethnicity, your gender, your sexual orientation, and a million other things could impact your position in life.
Obviously, you can make changes to improve your situation and I believe you ought to if you can. But again, some things are out of your control.
Examples of the importance of luck in personal finance.
The most obvious example is somebody like a monarch or a trust fund baby. These people happened to be born in the right family at the right time. When it comes to luck, these people have won the lottery.
I think it’s clear to everyone that these people didn’t amass their wealth due to their own attributes and that luck played a massive role in their personal finance success.
Unfortunately, not everyone can be born into royalty.
But what about self-made entrepreneurs?
Luck definitely plays a smaller role in these people’s success. However, it often plays more of a role than you may expect.
Even wildly successful people have acknowledged this. Investor Warren Buffett stated:
“I’ve had a lot of luck. Just being born in the United States in the 1930s … I didn’t have anything to do with picking the United States! And having decent genes for certain things … In my case I was sort of wired for capital allocation.”
and
“Just in my own case, I was born in 1930 with two sisters that have every bit the intelligence and drive, but didn’t have the same opportunities … If I’d been black, my future would have been entirely different. If I’d been female, my future would have been entirely different.”
This is not to say that Buffett didn’t work hard for his success. I simply want to illustrate how significant luck is.
Don’t focus on the wrong things.
In their constant avoidance of acknowledging luck, influencers on websites like LinkedIn will often attribute financial success to actions that have little to no correlation with financial success.
Let’s imagine you find some self-help guru online.
He might tell you to get up at 5am every day and then reference a multi-millionaire who once made an off-hand comment about doing so as proof that this is a sure-fire route to success.
If you search further, you might find even stupider advice, like manifesting your fate by hoping and visualising hard enough.
In my opinion, all this advice is useless and ignores the role that luck plays in people’s lives.
Maybe very rich people do tend to get up earlier, but is that really what made the difference?
Maybe one rich guy likes to talk about visualising piles of money and waiting for the universe to bring it to him, but is that really what made a difference?
People will attribute all kinds of things to their success, but rarely admit how lucky they got.
How can I put the odds in my favour?
I think the most important thing you can do when chasing personal finance success is to focus on solid fundamentals.
Once you have a solid foundation, you can add all your favourite influencer advice on top of it to your heart’s desire.
The easiest way I’ve found to practice solid fundamentals is by focussing on the following:
- Building an emergency fund to safeguard yourself from surprise expenses.
- Living below your means by lowering your expenses and increasing your income.
- Long-term investing to make sure your money is growing over time.
I’ve written a much more in-depth post about these fundamentals here.
It’s true that we can’t change luck, but most of us can take steps towards improving our lives.
I think it’s best to try to focus on things that are within our control. If you put too much focus on things that are outside of your control, you will become stressed and even put yourself at risk of making worse decisions that are self-destructive in the long run.