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How Are Caravan Salesmen Becoming Millionaires Before Lawyers?

How Are Caravan Salesmen Becoming Millionaires Before Lawyers?

 

In this article, you will learn how a man earning minimum wage, plus sales commissions, may become wealthier than a lawyer with a $200,000 education. In my examples, we only see a small portion of Carl and Larry’s life. The examples only span over 20 years. Apply these principles to the rest of their lives if you wish and see how one becomes richer than the other.

The examples do not account for numerous life incidents, such as how the lawyer loses a big case and takes a significant pay cut, or how the caravan salesman’s wife runs off with his savings. The examples assume there is smooth sailing through calm seas for 20 years. Neither of the men get married or have financial help from relationship-partners during the 20-year period, but both do have child support payments to pay.

In fairness, I have tried to side with the lawyer a little more than I should, to show you that the numbers for the caravan salesman are not forced. For example, the Lawyer’s student loan repayments are robust, but are not crippling, I have veered on the low side with regards to a lawyer’s personal expenses, house bills and car expenses, and have even made his child support payments lower than the caravan salesman’s, while making the lawyers investment interest double that of the caravan salesman.

Expenses And Getting By

Larry the lawyer and Carl the caravan salesman lead very different lives. The lawyer has to keep up appearances, which means expensive phones, fancy meals with clients, and tailor-made clothing. Carl lives in a lower-middle-class area and has to maintain his standing in the community, but doesn’t have to maintain an image. For example, he will not lose customers if they see him walking around a garden center in dirty and ripped jeans, but will lose customers if he is seen in ripped jeans at work.

Here are their monthly expenses.

Larry The Lawyer

In 2011, the Bureau of Labor Statistics estimates that lawyers earned an average salary of $130,490 per year, so let’s say the lawyer earns $90,000 after taxes, which is $7500 per month. Just like Carl, he has child support payments each month, but he worked out a slick rate of just $350 per month.

Mortgage – $1300

Bills – $1250

Car Expenses – $1100

Personal Expenses – $2100

Student loan repayments – $900

Child Support – $350

Total = $7000 per month

Wage = $7500 per month

Left Over = $500 per month

Carl The Caravan Salesman

Carl works for minimum wage, which is currently $7.25 per hour. He earns $15,080 annually, but also makes commissions. He works hard and gets two to three commissions per month, which bumps his wage up to around $32,000 after taxes, which is a low (but respectable) wage for a job that doesn’t require qualifications.

Mortgage – $650

Bills – $200

Car Expenses – $200

Personal Expenses – $250

Child Support – $550

Total = $1850 per month

Wage = $2666

Left Over = $816 per month

What Can We Learn From This?

As you can see, the lawyer earns significantly more than the caravan salesman, but his expenses are also dramatically higher. The caravan salesman drives a secondhand car that is five years old, but the lawyer drives a luxury car that is two years old. The caravan salesman wears clothes from Wal-Mart, and the lawyer wears custom-made suits. If the lawyer turned up in a caravan salesman’s car, and wearing the salesman’s clothes, the lawyer would lose all credibility.

In my example, the lawyer only pays $350 in child support, but in real life, and with his wage, he would probably pay a lot more. The lawyer also has 10 years of student loans to pay off, which adds to his monthly expenses.

How Do The Two Invest?

In my examples, you can see the principle of the idea around how each person invests and how much they invest. The numbers are simply to illuminate the principle, where most variables such as inflation would be constant for both the lawyer and the salesman. There is also the basic assumption that neither would experience any new tax relief or burden during the 20-year period.

Larry The Lawyer

The lawyer has a few savvy friends that work in the financial sector, and they invest his $500 per month into stocks that see a reasonable 12% growth over 20 years.

$500 saved per month

$6000 per year

20 years of investing = $120,000

Growth of around 12% = $14,400

Total = $134,400

Carl The Caravan Salesman

With more left over every month, Carl decides to split his investments between a savings account with his bank, and government bonds. They only produce a 6% growth rate over 20 years, but Carl doesn’t know enough about investing to try anything more risky.

$816 saved per month

$9792 saved per year

20 years of investing = $195,840

Growth of around 6% = $11,750

Total = $207,590

What Can We Learn From This?

As you can see, Carl the salesman has more left over at the end on the month because he has fewer expenses as a caravan salesman than a lawyer. If Carl suddenly started wearing $300 shoes, he would have trouble selling to his target customers because they may be suspicious as to how he earns enough to buy fancy shoes.

Even with half the growth that the lawyer enjoys, Carl the caravan salesman still has significantly more after 20 years than the lawyer does.

Buying A House

Most people buy a house at some point in their lives. Both Carl and Larry have healthy relationships with women, but during a 20-year period, they do not find true love.  Consequently, they do not have a relationship where the women help them pay their bills or buy a house together. The two men buy houses and pay for them themselves.

Larry The Lawyer

He finds an impressive 3-bedroom house in Congers, Rockland County, New York and gets a mortgage for $280,800.

Total cost of mortgage = $280,800

Value of the house = $196,560

Paid per month = $1300

Time to complete purchase = 18 years

Our examples deal with 20-year spans, which means Larry the lawyer gets two years without having to pay mortgage payments. During the two years, Larry puts his $1300 per month into a savings account. It earns 6% interest, meaning he also has an extra $33,072 along with owning his house at the end of the 20-year period.

Carl The Caravan Salesman

He finds a nice 2-bedroom house in Ellenville, Ulster County, New York, and gets a mortgage that costs a total of $62,400.

Total cost of mortgage = $62,400

Value of the house = $43,680

Paid per month = $650

Time to complete purchase = 8 years

Our examples deal with 20-year spans, so during the remaining 12 years, Carl saves his $650 per month. He too puts what would have been his mortgage payments into a savings account with 6% interest, and at the end of the 20-year period he has $98,761.

What Can We Learn From This?

Both men own a house at the end of the 20-year period, but it only takes Carl eight years, where it takes Larry 18 years. Larry now owns a very expensive house and it impresses his colleagues. However, Carl has managed to save more money in the bank, and in addition, Carl’s house is far cheaper to run and easier to sell. It also has more room for value growth, and has less tax imposed on it. Even though Carl has a less expensive house, he still has more money in the bank.

What Is The Final Tally?

After 20 years, Larry has $448,272 and Carl has $368,751. Despite their differences in education, job and earning power, Carl only has $79,521 less than Larry. Carl is working a low paid job, and Larry earns almost three times more than Carl, and yet Carl is almost as wealthy as Larry.

Larry

$134,400 from investing

$196,560 house

$33,072 savings

Total = $364,062

Carl

$207,590 from investing

$43,680 house

$98,761 savings

Total = $350,031

So, How Does The Caravan Salesman Become A Millionaire First?

If after 20 years, Carl the salesman is worth only $14,031 less than Larry the lawyer, then logic suggests that Larry will become a millionaire first. However, you have overlooked a few things.

Carl will become a millionaire first because he started selling caravans out of High School, but Larry had to undergo seven years of higher education, and then six months of extra training before earning his wage. In addition, Carl doesn’t have student loan debts to repay. Carl is going to start with an advantage of over $129,062 because he has seven years of working and earning. In addition, he will not have the burden of maintaining a reputation, which means his expenses will be significantly lower than the lawyer’s expenses.

The seven-year advantage that Carl has means that you may add the $129,062 onto Carl’s $350,031, meaning that at one point, Carl will be worth $479,093, whereas Larry will only be worth $364,062.

Also, Larry has to maintain an image, which means he will be expected to host a grand and expensive wedding, to go away on expensive holidays, and pay a large sum for his child’s education. Larry will be expected to foot the bill for big occasions, attend country clubs, and have exclusive credit cards. None of this will be expected of Carl.

About The Author

Ben Todd

Ben was a seriously broke graduate student with bad credit who after finding himself rejected for any sort of credit card or loan for most of his adult life, finally decided to get his financial life in order. ‘

He spent several years reading as many financial advice books and blogs as he could.

And suprisingly, Ben found he actually LIKED the topic of personal finance; after fixing his own finances, starting his own successful work at home website business, and using his earnings to get out of debt, created echeck.org to help others do likewise!

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