american dream

Out With The Old And In With The New

The American Dream. A house in the suburbs, 2.5 children, fancy car in the driveway and a job with a pension and gold watch.  This may sound a little bit outdated, but it’s still the structure, on the whole, of the American Dream.  However, there has always been one flaw in this dream.

DEBT.

 78% of Americans live paycheck to paycheck and are literally two paychecks away from losing everything.  When this happens, and it does, people find themselves losing their homes, getting divorced, losing their car to the repo man.  This is the underbelly of the American dream.  Often, the race for the American Dream requires people living with debt as an acceptable and expected part of life. And with that comes the ugly fact that people you may consider ‘rich’ and DO make a lot of money, are still living paycheck to paycheck to finance their interpretation of what is the normal, middle class existence.

Personal Finance In America

A real problem today, and has been, perhaps, for more than a decade, is that they no longer teach personal finance basics in High School.  As a result, our young adults leave High School, finance a college education, and have no idea how to properly execute their finances.  Credit becomes an easy way to get the things they want without putting in the hard work to get them.  Accordingly, that rollercoaster of debt just keeps on adding cars as they grow older.  According to Forbes.com, “Student loan debt is now the second highest consumer debt category – behind only mortgage debt – and higher than both credit cards and auto loans.  According to Make Lemonade, there are more than 44 million borrowers who collectively owe $1.5 trillion in student loan debt in the U.S. alone. “

As these students move forward into their careers, relationships and their adult lives in general, they already have a massive amount of personal debt stacked against them.  Hence, many articles that state that the American Dream is dead and that retirement is just a myth.

What’s Old Is New Again

grandparents

On the whole, our grandparents knew a heck of a lot more about personal finance than we do these days.  They knew what it really meant when they said to ‘save for a rainy day’, because, folks, it’s always going to rain one day. Dave Ramsey said, in his book, The Total Money Makeover, “The Great Depression permanently changed the way many people handled their money.  If you have a grandfather or great-aunt who was an adult during that time, he or she likely has a completely different way of looking at debt, saving, and giving than most people of other generations.  That is because your loved one has experience.”  

Age And Wisdom

They didn’t have a credit card. They paid cash for most everything.  If they didn’t have the cash, they didn’t buy it.  Additionally, they took care of the things they did have, because them wanted them to last.  Unlike this throw away culture we live in today, they cherished the things they had and ensured they got the last bit of usage out of them before they were abandoned. And lastly, they learned the hard way and knew that today’s prosperity does not guarantee tomorrow’s.  So let us take a leap of faith and look together at an old way of doing things with our finances that some would consider outrageous today.

No, I’m Not Kidding

Live on less than you make.  Live beneath your means.  Spend less than you make.  I hope you’re seeing a trend here.  I, personally, live on 50% of my net income.

I’ll leave you with a moment to let that sink in…

Ok, are we all good?  Great!  Because while you might not be able to do something as extreme as 50%, you CAN do a heck of a lot better than living paycheck to paycheck.  Now,  I’ll write separate posts about these steps in more detail, but here is what you need to do.

You need to spend your money on paper before it’s actually spent.  In other words, create a monthly written budget of all your expenses. P.T. Barnum said, “Money is an excellent slave and a horrible master.”  Accordingly, if you don’t know where your money is going, then it’s going to go EVERYWHERE.  At the end of the month you’ll be left asking, where did all the money go?  Following a budget fixes this issue.  It took me some time to actually follow the budget I first wrote for myself, but after about two months of adding line items for things I didn’t budget for, I got it in gear and buckled down.

One Foot After The Other

The next step is to trim the fat.  You need to make sacrifices that are acceptable to you if you truly want to reach your goals.  Remember, dreams are just dreams, but dreams become goals when you have a written plan.  I cut the cable and went ‘Internet Only’.  I exchanged that hefty bill for Netflix and said, if I don’t have enough to watch, I most likely need to be reading a good book.  Call every service provider you have and negotiate a better cost. This includes electricity, internet service, the cell phone carrier you use, and your vehicle insurance.  Feel free to add anything I didn’t list.

Here Is When Things Got Interesting

Once you have gotten a great grasp of following a budget, you may see you’ve got money you didn’t know you had at the end of the month.  This is exactly what happened to me.  I didn’t have to ask myself what I was going to do with it, since I had a plan, ala, Dave Ramsey.  Become debt free.  So I ordered a credit report and printed it out.  My next step was to take all my debts, public and private, and rank them from smallest to largest.  Secondly, I began to pay off my debts with the money I had left over at the end of each month, from smallest to largest.

At the end of 6 months, I was debt free.   Your time frame may vary dependent on your income and the amount of personal debt you owe.  Believe me, paying off these debts and watching the amount of money I had at the end of the month GROW, because I was no longer making payments on debts was the most AMAZING feeling!  I was debt free and it was all I could have dreamed it could be.

My Financial Sunrise

I knew once I was debt free, that I needed to reassess my finances. It was at this time I discovered I could live and get by with only ONE of my two monthly paychecks.  I was astounded!  I knew my adventure into Financial Independence was just beginning.  And it was like the promise of a beautiful shiny sunrise on a brand new day.

Rob

sunrise

Rob Loftus

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Great reminder, thank you. And congratulations!! Its so, SO important to know right where you are in therms of finances. So many people, including me at one time, just hide their head in the sand. Things will never get better unless you are willing to make changes, and you have to know where you are to start out. 

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