When budgeting, spending, saving, investing, and (most importantly) accumulating wealth, I am doing so with 2 middle fingers. One middle finger is aimed at “normal”, i.e. the Facebook-ready lifestyle of the upper middle class – a cosmic supernova of waste and excessive spending. The other middle finger is pointed toward the retail investing matrix – a cruel and shallow money trench where thieves and pimps run free and good men die like dogs. And that’s before you address the negatives*…
We’ll break this up into two parts and point the first middle finger at “normal” this week, and next week we’ll flip the bird at retail investing.
The Facebook-Ready Lifestyle -> Middle Finger #1:
In a recent Roper report, those making more than $50,000 per year said they would need to make $200,000 per year in order to be “fulfilled”. I don’t think anything defines “rat-race” like these numbers. Are you kidding me? And this is normal…
The USA Today did a study and found that the middle-class lifestyle in America costs $130,000 per year, but the median income is less than half that. Living on less than you make? It is not happening… This is why credit cards + car loans total over $2 TRILLION dollars in America today. And this is normal…
The latest data I could find on the average American monthly household budget was 2015, where that average was $4,700 per month. I’m just gonna come right out and say it – our family lives on a fraction of that, not out of necessity but out of common sense frugality. For as long as I maintain my current job and take advantage of all the benefits offered, we can easily live on far less than the average. Now granted, I have never owned a car made in this century (currently a ’99 Jeep) and my wardrobe consists of 3 pairs of pants, 6 shirts, and 2 sweaters with 3 pairs of shoes (not an exaggeration). This totally doable – even in Williamson County**! And this is not normal… I would encourage you – do not be normal.
Over half of us age 54 & under have less than $10,000 saved for retirement. Normal…
What trips us up:
Lack of a budget: Know what you are going to spend before you spend it. Write it down or get it into a spreadsheet so you can adjust the numbers and see the effect on the end result. You need to budget your monthly, regular expenses and then plan and save for the bigger and more infrequent expenses. Remember, you’re trying to save for retirement too – budget that in! When it’s Feb. 17 and your budget is gone, don’t reach for the credit card to hold you over until March 1, reach for the ice water and the Kraft Mac & Cheese. I know, it is not fun, but for some it is time to get serious.
Lack of emergency savings: George Washington University just did a big study on savings rates of the middle class and found that 40% of middle class Americans would be unable to come up with $2,000 inside of 30 days. This spells trouble on several different fronts. As discussed in my last “Benjamins” blog, keeping a 6-month reserve of living expenses in cash is very important to your overall financial health. Build up your cash savings as soon as you can.
Lack of self reliance: When the washing machine breaks, I fix it. It does not mean a trip to Home Depot for a new $1,000 washer or a call to a repairman who charges a $125 just to drive over and show me his butt-crack. It’s usually a $50 part from Parts Select and a few hours of quality time with my sons teaching them the fine art of cussing and tool use. Seriously, this website is great – parts for everything under the sun and then instructional videos showing you how to do the job. I’ve rebuilt my washer and dryer for less than $100 each and then repaired my dishwasher (leaky seal) for less than $25 and my refrigerator (water dispenser + water lines) for less than $50. Calling a repairman for those simple jobs would have totaled $1,000 or more. I also change my own oil in my cars for way less than than Jiffy Lube, with higher quality oil for better gas mileage as a bonus. I do almost all car maintenance and repairs as well and just about anything around the house except painting – I HATE painting!
Stuck in the credit wheel: Pay off your consumer debts and your car & student loans as quickly as possible. Refinance your home to a 15 year mortgage to give yourself light at the end of the tunnel – 30 years out is too hard to see. Being an appreciating asset, your home is the only thing you should look at financing, and you should be able to find a 15 year mortgage at 3% or less right now so re-fi if you are getting hammered on your rate! Get off the carousel of debt and then avoid it like the plague. I don’t care what kind of “points” you think you’re collecting on your credit card or what kind of cash back offer you think you have that is supposedly saving you money, stay out of the credit game entirely!
Stuck in the Retail Matrix: Store Credit Cards – don’t fall for the scam of saving 10% if you sign up for the card. Pay cash and swim away from that shark. Don’t do the “same as cash” offers either. Pay for it up front or return to the store when you have enough money to make it happen on the spot. I carry 2 debit cards, personal and business, and that’s it. Extended Warranties – they are crap. Don’t buy them. Car Leases – Run*The*Other*Way* Financing a depreciating asset is never a good idea but car leases are even worse. I might even devote a whole blog to car leasing in the future, but high fees, upfront costs, back end costs, excessive wear & mileage costs, and maintenance costs make them just horrible, horrible consumer deals. Imagine renting a car, being responsible for its maintenance and upkeep, and then deciding to buy it only to find you’d still owe a colossal premium on the sales price from when you started the rental 2 or 3 years ago – and your only option is to give it back and walk away empty handed or continue the bad deal with a different car. Nope. Find a car you can afford and pay cash. If you think your friends are turning up their noses at your 18 year old payment-free and cheap to insure car, you might need new friends. Scams like home warranties, monthly pest control contracts, id theft protection, whole or universal life insurance policies, pre-paid legal advice, expensive gym memberships, time shares, subscription food services, etc… Stay away, save your money, be frugal, be smart.
Facecation vs Staycation:
I must admit, I love Facecation season. I’m always excited to see who can get to Seaside the fastest and be the first to post that toes in the sand picture all of America is waiting to see. I envision a line of mini-vans with cargo toppers revved up in the school pickup line with the traffic-control volunteer waving a green flag as the first wave of competitors jump in and those automatic doors slide shut. And they’re off!!!!
It is with no sadness that I report $3,000 trips 4 times a year are just not a part of our budget. That doesn’t mean we don’t get out and have fun – a trip over to Lobelville for some Hott’s Bbq and a ride through the Amish villages along with some amazing hiking around Sewanee were some of the highlights of our summer. We did go to Orange Beach for Fall Break, but we stayed at a very nice (and I would highly recommend) Best Western at half the cost of a trip to Rosemary or Seaside. Not quite as Facebook-sexy, but we had a blast. I also didn’t sweat when it came time to pay the tab for a nice meal along they way…
I’m afraid it’s hard to write this and not sound pompous or judgmental, but that is absolutely not my aim. It’s a look at real life. I’m definitely guilty of several of the above. I’ve also seen how much easier it is to live below my means and how easy that makes it to quickly accumulate money instead of seeing it fly out of my hands uncontrollably. This is not an effort to chastise or pound my chest to say “look at me”, but an effort to inspire and maybe rattle some synapses towards a thought or two of doing things a bit different – maybe inspiring you to lift your own middle finger towards normal, jumping out of the rat race, and choosing “not normal” for a change. You will be rewarded with financial independence much sooner than you would ever imagine. I promise.
Thanks for reading, please leave a comment and come back next week for the 2nd middle finger pointed toward the world of retail investing and the charlatans represented there.
* = Hunter S. Thompson paraphrased from “
** = Forbes ranks Williamson County TN as the #20 wealthiest county in America just behind Santa Clara, CA. Frugality here is as rare as moon rocks.