Tuesday, April 10, 2012

The American Dream or an Image?

"Wow! Look at that hot car!" 

We can't help but notice when they pass us on the street.  The Corvette might not push your buttons, it may be a top of the line truck, Hummer, Mercedes, Jag, or any one of a number of new shiny vehicles.  They catch our attention.  We cannot help but notice and if by chance we don't the driver often turns up the radio just so we do.  And, when summer comes the top comes down and often the driver will use the opportunity at every stop light to smile and wink at the cuties in the next car.  Don't get me wrong I like a nice car as well as the next person but I have also seen the vampire effect it can have on a person.  I once knew a person that was pretty nice until he got behind the wheel of his dream car.  The change in his personality was dramatic and not good. 

Not everyone is thus affected but what we easily forget is that the person has not just bought a car but a long huge debt to be paid with interest.  Even our terminology is deceptive.  Recently someone told me they just "bought a new car".  "Wow", I responded. "How did you save that much money?" She demurely responded that it was a loan.  Isn't that usually what it is?  So when we see the car it really translates to this:

In order to achieve a higher level of financial freedom we need to start thinking differently.  We cannot only experience things with our five senses for advertisers are trained to appeal to these.  We need to go beyond and let our minds calculate the real picture and not solely rely on the image we see.  To practice doing this one can begin a routine of adding to our mental dialogue to add "Wow, that is a hot car, that person must REALLY be in big debt"  See how it just sounds different?  In most cases you will be correct.

So what is the #1 selling car in America at this time?  The winner is the Toyota Camry.  The cost? Between $22,000 and $25,000.  And look what this owner has to say:  "To date, my Camry has been the best investment I have EVER made. With more than 130K miles, my Camry has given me no major problems."

So what happens three years later?  The Camry Kelly Blue book value with almost 65,000 miles is $15,944.   When four more years pass and twice the amount of miles the value is closer to $8,000 if you sell it yourself or $6,000 if you trade it in.

So in 8 years what one considers "the best investment I have EVER made" we can anticipate the value going from $25,000 to $8,000.  Only a loss of $13,000 not including any interest that was paid on a loan.  Of course this is not taking into consideration the fact that the person was able to drive the car this entire time and thank God they did not wreck it.

One then must wonder what the definition of investment really is.  I thought it was hopefully something that went up in value not something guaranteed to go down in value.  Most of us need a car so some money does need to be spent for transportation but unless my accounting class was wrong a vehicle was considered a depreciating asset.

Funny how definitions and usage of words can mislead us.  Taking this one step further it is easy to see how advertising double speak can lead us in the exact opposite direction we hope to go.  If we are not making a conscious effort we have signed on the dotted line without even thinking about it.  We are especially vulnerable when we are in need of the product or service we are considering and do not have the cash available.  In our need our minds are fertile ground for what sounds good.  On this same subject I wanted to share a post that was published a couple years ago:

The essence of the American Dream is that if a person works hard they will be able to better themselves and achieve their dreams, goals, and ambitions. It is the foundation of our country's success and why immigrants continue to pour into the country. It truly is a great place to be!

Recently though there has been a blurring of the lines between the dream and the reality and what has passed as the fulfillment of the American Dream has actually been just an image.

Free flowing credit has created an image of success and now all that is left for many people is the bills. Homes have been foreclosed, cars repossessed, and credit reports ruined. It is my opinion that this was a systematic attempt by the banks to promote big spending by us to to make big short term profits for them. The financial institutions have enticed us into thinking that spending more than we make is the quickest and best way to fulfill our dreams. Yes, there is much fault on the economy, the banks, and other forces that have brought many families to a downturn but much of where we are at now may be a direct result of our own choices. I know that either one of these positions - corporate greed and manipulation, or personal responsibility can both be touchy subjects but unless it is said we will not have the will or the courage we need to deal with the tasks that need to be accomplished.

Where to start? In The Trenches has charts to help you set up your own personal budget. And here we will talk about one of the first steps to determine whether you have been living the dream or the image. Create a balance sheet. Don't groan. We work too hard to not take a look. If you have never done one there is a sample in the book or you can go to your bank and they can assist you.

The balance sheet is a tremendously helpful tool. It compares your assets to your debts and the difference is your net worth. This is the value of what you have accumulated for all your hard work. If this is your first time to make one it can be a starting point. Save it on the computer or print it and keep it in a three ring binder. At the end of the year do another one and compare. Are you moving forward, running in place, or losing ground? Are you creating wealth or creating debt? These questions cannot be answered by looking at your new t.v. or new car, or even your paycheck. All these things can mislead you into thinking that your situation is improving. Most of us are In The Trenches.

Are you living the American Dream or just an image?