My spouse is much more conservative than I am and over many years has taught me a great deal about being fiscally responsible. It was not an easy lesson. I see “rich people” on television who drive new cars, live in huge houses, dress in fine clothes and eat at the best restaurants. I want to be like them and I believe many of us have been conditioned to believe that we work hard so we deserve those things. We all want the American Dream.
As I have become older I am thinking about retirement in the future and what that will look like. I am finding that earlier life decisions can come back to haunt you. That luxury car you thought you needed to have? It cost you much more when you consider if you would have bought a car for half the price in 1980, and taken the difference and invested it could have added $50k or more to your retirement savings. Now add your luxury vacation, your fancy dinners and designer clothing, and you may have impacted your retirement in the hundreds of thousands, if not millions of dollars.
We all do it. We have been trained to be consumers, not savers. If you think I am joking, search the internet for the statistics of the average person’s savings or retirement account and you will see what all this consumerism has done to many American people and their future. Those friends you think are Millionaires? They probably aren’t. 96% of US households are not.
Believe me when I say I have, over the years, made some poor purchase decisions because I felt I “needed” an item or experience, or just impulsively bought. My reasoning? “I could die tomorrow”. (I could, but statistically, I could also win the lottery and that probably won’t happen either). I will tell you I still faithfully justify each purchase in my mind as “an experience I could never replace”. We all need to experience different things, but most of us need to do so in greater moderation.
My point is this, Americans have been trained by companies to believe that we should all spend because we deserve the good life. We are Americans! We live in the best country in the world! We can have the American Dream for only $5000 down and 120 simple monthly payments. We are conditioned to act on our dreams and wants, not just meet our basic needs. Television and brand leaders have created visual role models that many believe they should imitate. We have given the almighty dollar so much power over us, that we elevate the wealthy, no matter how they achieved it, honestly or not, as those we should emulate. We continue to buy things we can’t afford, to impress others doing the same. Our government does it too, because – they are us.
This all came to me as a light bulb moment recently when I was helping my son determine how much he could afford in a house. I realized we are all being trained to be poor, but look wealthy while doing it. Here is how I figured this out:
I started at a home buying website when I put in his income and debt and then ran the numbers to see what it told me. (He had already met with a Banker and I knew how much they would loan him). According to the website, he can buy a little more house than I expected. (This is how MOST would buy a house, adding even a bit more because of the amazing raise they could be getting soon enough).
Next, I downloaded a budget worksheet from a bank website and began to add the things required to own a house NOT included in the payment estimate from the home buying website. Crazy things like heat, electricity, garbage removal, home repairs, cable TV, etc. His money left for a house payment now was quite a bit lower. For fun, I added an imaginary car payment because he will always need a car. I added gas too, and car repairs, insurance, food, because he seems to use those. I added some occasional fun and travel and a little bit of money for life lesson expenses too. The house he could really afford now was much lower than the original website recommendation.
Then I went to budget for his future. In the bank created budgeting worksheet I had downloaded, there was no budget line for savings or retirement. NONE. ZERO. NADA. NOTHING. The message was simple – spend it all! No wonder our savings rate is so bad! Even the bank forgot it!
As I told my son, you should only buy what you can really afford.
How many of us wished we had a higher house payment? I don’t see any hands raised. How many of us wish our house payment was lower or non-existent? Put your hands down. I rest my case, your honor. (Those of you who have your house paid off, good for you!) We are told, “Buy as much house as you can afford”, but few are taught how to accurately calculate the real-life number – “This is what you can realistically afford!”
I have a lot of respect for the new generation that has decided to look at “stuff” differently, to not be swayed by the marketing machine. Many younger people believe in sharing cars or taking public transportation; owning smaller or tiny houses; living with no debt. They have been watching us Boomers and seeing how well it has worked for us. Many of them are making a decision to not follow us in our footsteps. Their world will be different, with many more challenges, not less. But hopefully, in the long run, they will be prepared and most importantly, be happy. Hopefully, they will live within their means, in a way which is meaningful.
I do know this – American dream poverty is not the answer – no matter how pretty it is packaged to appear to others.
The Mirror has two faces 
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