Forget About the Joneses… They’re Not Worth Keeping up With!
‘Things” don’t make you happy.
Friends, family and experiences with them are the true sources of happiness — NOT expensive cars, big houses or fancy clothes!
Family and true friends couldn’t care less about your material possessions, which is why keeping up the Joneses is such a dumb obsession.
Even Worse, It’s Killing Your Financial Future
And this is doubly true if you, like many Americans, are using debt to finance your consumerism.
And Americans are up to their eyeballs in debt!
Total consumer debt even excluding home mortgages has reached a nosebleed $4 trillion.
Consumer debt falls into three categories: student loans, auto loans and credit card debt.
Let’s break down what is draining your savings. Then we’ll find ways for you to stop the bleeding and move from the red to the black.
Your Debt… Your Solutions
As I mentioned most debt stems from three categories:
Student Loans: I just put two daughters through college so I know it isn’t cheap. But American students have collectively accumulated $1.5 trillion in student loans. That works out to an average of $34,000 per person !
The debt burden is so heavy 1,400 people default on their student loans each and every day!
Auto Loans: Who doesn’t enjoy driving a nice car? No problem as long as you can afford it…
But too many people are busting their budgets on cars they can’t afford. Americans have borrowed $1.3 trillion worth of auto loans and stretched out the length of the auto loan to a record 69 months! And one-third of car buyers are saddled with payments for 84 months!
Credit Cards: Credit card debt is at $1 trillion (a record high) and counting. That works out to $4,293 for everyone carrying a balance!
And even though the Federal Reserve just lowered interest rates, the average credit card interest rate has soared to a record 17.4%. Ouch!
What those numbers mean is that we have comfortably fallen into a pay-for-it-later lifestyle and it’s destroying your financial future.
But there’s a way out… First it starts with understanding “acceptable debt” versus “unacceptable debt.”
Acceptable Debt & Unacceptable Debt
Acceptable debt is used to purchase or finance productive activities, like tools for a car mechanic or a new factory for a business owner.
Unacceptable debt is used to pay for “right now” consumption.
Remember, the use of debt is nothing more than future consumption brought forward.
Debt, like the $4 trillion in nonmortgage consumer debt mentioned above, means consumption that might have happened in the future isn’t going to happen.
You are robbing Peter (your future) to pay Paul (your present).
Mike, What Do I Do?
Stop, stop, stop living beyond your means for goodness’ sake!
And stop trying to keep up with the Joneses. Once you win the mental game on saving and disciplined spending the rest is easy.
Start a savings account.
You can use bankrate.com to find out which banks pay the highest rates on savings accounts.
For example, Citibank is paying 2.36% with only a $1 minimum.
Bottom line: If you want to retire debt-free, you need to take a hard look at whether you are living within your means or spending too much.
No one is going to just hand you a million dollars to retire on, but if you cut out that expensive coffee, pay off your credit cards and make a few other adjustments to your spending, you certainly can do it!
Here’s to growing your wealth,
Chief Income Expert