Some time ago, I read an article in “O,” the Oprah Magazine entitled “Debt Diet.” You’d have to be living in a cave under a rock if you’re not familiar with “The Debt Diet” given the fact that an entire week of “The Oprah Show” was centered on this very subject. It comes as no surprise to me that most Americans are living paycheck to paycheck, hand to mouth, struggling to make ends meet. What caught my attention as I was reading this article is the fact that all the families they profiled in the article made more than $100,000 per year. Over the next couple of months, similar articles appeared in Black Enterprise, Smart Money, Kiplingers and Consumer Reports. All these articles shared a similar story—high-income people struggling to get by financially. In a Money Magazine publication, the lead story on the cover was “Scraping by on $150,000 per year.” Each article shared some helpful ideas on how to regain control of your money. However, all of them fell short of illustrating what I’m about to point out in this column.
People who are truly winning financially are people who are extremely frugal, avoid borrowing money and are super-savers. That dear friend is un-American.
I despise a victim’s mentality. However, I must say that conventional wisdom, Uncle Sam, modern technology, ego, laziness and the turning of various products and services that use to be free into commodities, all have a part in our eventual financial demise. In other words, it’s not entirely your fault. This money-driven world is set up for us to fail. We play a huge part in our financial demise with ego and laziness but there are a lot of outside influences that add to the madness.
Conventional wisdom suggests that we give 10 percent of our income to the local church or some charitable organization and that we save 10 percent of our income for our individual future needs and goals. You heard the saying “pay yourself first.” Sound advice! Who would disagree? I question its practicability. You see, once you factor in that federal, state, local and Social Security taxes along with various payroll deductions like health insurance account for roughly 25-30 percent of our paycheck, if you were to save 10 percent, give away 10 percent and payroll deductions hit you for another 30 percent, that’s 50 percent of your paycheck gone and you have yet to pay the mortgage, feed and clothe the family, pay utility bills and put gas in the car. You can stretch a dollar but so far. That’s why you have people “Scraping by on $150,000 per year.” Household income generally parallels household expenses. “More money, more expenses, more debt—more problems.”
Uncle Sam is a pimp. When I noticed the character they portray as Uncle Sam and the self-proclaimed pimp Arch Bishop Don Magic Juan both wore top hats and funny colorful suits, it hit me—Uncle Sam is a pimp. Both make a living off having hard working people doing the dirty work while they reap huge income rewards. Don’t even dare try to shortchange Uncle Sam or Don Magic Juan what you owe them. You’ll be pimp- smacked with fees, penalties, interest and a bad reputation. As if federal, state, Social Security and local taxes are not enough, we’re hit with property taxes and sales taxes on products and services we buy. If you manage to save too much money and die without a sound financial plan, you’ll be hit with death taxes as well.
Modern technology is costly. Most financial advisers speak candidly about inflation eroding our purchasing power. Do you remember back in the day when it was just CBS, ABC and NBC to watch on television? As long as you had a television, these services were free. Nowadays with cable and dish network most Americans have up to 200 channels to flip through on the television with an average price tag of $150 per month. Space will not allow me to go into detail about cell phones, Internet services and satellite radio. This has nothing to with technology but I wish I had thought of packaging water in a bottle then selling it. The bottom line is modern technology has grown faster than wages.
Let go of the ego. I’m not talking about waffles. I’m talking about adult-peer pressure, cultural expectation or what most people refer to as “keeping up with the Joneses.” I’ve gone into great detail in the past on this subject. The question is would you rather “look rich” or “be rich.” Financial guru Suzie Orman said, “People spend more than they have because they feel less than.” In other words, keeping up with the Joneses is truly a self-esteem issue.
Laziness begets poverty. Nowadays, we pay people to cook, clean the house, shovel the snow, cut the grass, chauffeur us around and raise our children. The best way to save a dollar is through good old fashion “sweat equity.” In other words, roll your sleeves up and do it yourself!
You now understand why you’re not getting ahead financially like you think you should. Now that you know, you have no excuses. Either you’re going to work hard, spend smart, become more frugal and save aggressively or you’ll one day be in the same boat of that “USA Today” article, “Retirees up against debt.”
(Mortgage and Personal Finance Expert Damon Carr is the owner of ACE Financial. Sign up for Damon’s FREE Online Newsletter at www.allcreditexperts.com. Damon can be reached at 412-856-1183.)