Thursday, July 10, 2014

The American Dream

                         

by The Urban Blabbermouth
~
Many want to have the American Dream of a house, 2.5 kids and a dog, but I think that they misunderstand the American Dream.  They see the house, kids and dog and think that is it.  No!  The American Dream is about accumulating wealth.  It is only after you have wealth do you get the house, the kids and the dog.

Wealth is simply the difference between how much you own and how much you owe.  Sound like the definition of profits, corporate income less corporate expenses.  That is exactly what it is. Corporations accumulate wealth and so should you.

There has been lots on television news about inequality in America.  Maybe so, but just maybe, we are not helping ourselves and we are contributing to the inequality.  Most of us do not accumulate wealth, we accumulate debts.  Any time, you borrow money, you pay exorbitant interest on the money and that interest goes to the lenders who use it to add to their wealth. 

We give up savings for spending and we overspend.  Take a look in your closet.  If you did not buy another piece of clothing for the next two years, you still would not run out of clothes to wear every day.  Some buy expensive cars, Lexus, BMW  and so on, when they should get something less costly and save the difference.

A simple way to begin to accumulate wealth, and it's the one that I use, is to have a small amount deducted from your check and sent to your savings account.  It's does not have to be much and you will be surprised at the balance after five years.

Wealth is not just savings.  Saving is cash in the  bank.  Wealth includes other things like your house.  Your house is your biggest asset, to use more corporate lingo. The difference between the price that you can sell your house and your mortgage is wealth to you.  If your mortgage is paid off, then the house sale price is all yours.  You do have to subtract out the yearly property taxes and house maintenance costs from the sale price, but you will still have lots of wealth left over.  Remember, your house, while valuable, is not so easy to change into spending cash because you do have to live somewhere.

The rich get richer because they accumulate wealth.  You would do well to follow their example.  Those of us of a certain older age already know all this, learned the hard way, from life's experience.  We need to teach our kids so that they can make wise financial decision right from the start of their lives.

2 comments:

Athena Carson said...

It is increasingly difficult to get through life without debt. Anymore, it's about responsible debt management with the ultimate goal of being debt-free (of course), but it is a rare person who has the circumstances to be able to be debt-free from the get-go.

Another part of the problem is that the minute you start taking on debt, the numbers are so staggering they don't even seem real anymore. So you become desensitized to the idea of being in debt.

The Urban Blabbermouth said...

It too true, we have learned to live with debt because we only look at half the picture - the good life paid for with debt. Used to be all debt was bad. Now we have good debt and bad debt. Hmm, another post in there somewhere.

I like the wealth view, assets minus liability, to help me to keep both sides in view.

Thanks.