What is the good life to you? Like many, I used to imagine Barbie and Ken with the big home, matching BMWs, vacation home(s), and luxurious yacht. I assumed that Barbie and Ken were the very portrait of success. However, a closer look revealed that my vision was distorted. That mortgage payment is over 50% of Barbie and Ken’s gross income, and the BMW is leased. That boat was financed too. Once I realized that Barbie and Ken likely had plenty of credit cards and student loan payments too, I had a profound revelation. Barbie and Ken are broke! They are just a lot more risky and have more toys. They could not write a $20,000 check with their own money because they literally spend all of the wealth they can get their hands on. They have borrowed money to look and feel rich.
David Bach, author of “The Automatic Millionaire,” sheds some much needed light on this issue…
There is an unbelievable amount of wealth in America (and other developed countries), yet most people are not wealthy. For example, nearly half of the wealth in America is owned by less than 5 percent of the population. Individually, the other +95% doesn’t even come close, and the middle class is a dying breed.
Income vs. Wealth
It is not an income problem either. For example, in America, several millions of households make six figure incomes, yet few realize significant wealth. These households still live from paycheck to paycheck because they cannot out-earn their poor financial choices. Working for 10 to 25 years without having anything tangible to show for it is not wise. Unlike China, Japan, and Europe, savings seems to be a lost discipline in America. Note that according to a recent Business Week article, the national savings rates for Europe, Japan, and China are 20%, 25%, and 50%, respectively. On the other hand, America has a negative savings rate: for every dollar we earn, we spend $1.22. You see it is a lot easier to obtain a high salary than to have a high net worth.
That’s because obtaining a high net worth usually requires discipline and other smart wealth-building decisions. Unfortunately, most people do not have much wealth. Recall, wealth is how long you could survive financially without working.
Similarly, true financial independence means you have accumulated enough wealth to survive financially without a job. Your investment income supports your lifestyle.
Reshaping Your Portrait of Wealth
Our celebrity culture emphasizes extraordinary displays of wealth. I will be honest and admit that Oprah’s lifestyle seems desirable, even enviable. I heard recently that Jerry Seinfeld’s wife just gave her 21 pairs of shoes worth an estimated $18,000. Shoes are not my gift of choice, but that’s definitely impressive. This is the picture many of us get when thinking about the wealthy: pure extravagance. Listen to Dr. Fred Price’s fictional examples of how most people view success…
As interesting as those extreme examples of wealth are, most of the wealthy lead very typical lives. The no frills life of an average millionaire real estate or stock investor seems boring by comparison. Interestingly, this investor may NEVER realize a huge salary, but because he or she consistently invests, his cash flow is significant. Consider Robert Shemin’s illustration…
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I am not advocating any one route to wealth because there are numerous ways of achieving it. Regardless of your path, know that one of “the seven common denominators amongst those who successfully build wealth is… (that) they believe that financial independence is more important than displaying high social status” (Millionaire Next Door). The translation is impressing others with their wealth is NOT a major concern. This is food for thought on that next shopping excursion to Neiman Marcus, the new car dealership, or the electronics store.Related Posts
I loved your post! I think many of us can relate to it. I just published the true story of Patty and Gil, seems like they're the real Barbie and Ken (from your post) although not so broke anymore, they had their share of debts, but managed to pull through. Very well written, thank you. http://www.makemoneyonline-review.com/debts_credit
Tori,I just wanted to say thank you for the complement and for writing about your own "real life" version of Barbie and Ken. We need more people who are willing to challenge the current dogma that being in debt is the only way function financially.
This a great post. Have you read "The Millionaire Next Door?" It discusses how most rich people in America are quietly living among middle class folk. They're millionaires because they don't drive fancy cars, they don't wear expensive clothes, and they don't live in huge houses.
I absolutely love "Millionaire Next Door." It is by far one of the most comprehensive studies on millionaires and a gold mine of information. I often buy this book for friends. Thanks so much for the feedback.
Very interesting article. It reminds me of a guy I met years ago while my father and I were traveling to flea markets throughout the north eastern United States, selling exotic Native American artifacts. From time to time, my father would bring along this rather shabby looking fellow that wore beat up coveralls and emanated a body odor resembling the essence of onions. He was quite, smoked a lot of cigarettes, and brought along a few items that he would sell for a dime or a nickle. I asked why he came along if he wasn't making any money. He smiled at me and charismatically said, "It's easy for a rich man to act poor, but it's hard for a poor man to act rich. Now let me show you something…" He reach into the center pocket of his coveralls and pulled out a plastic zip lock bag. As he revealed its contents my eyes nearly popped out of my head. He unfolded 100 dollar bill after 100 dollar bill. To this day I have never seen some much actual cash at one time. There had to have been at least 10K in actual cash. It was incredible. Anyway thanks for bringing back the memory.
Shawn, Yes, yes, yes. It is so important to get the word out that living rich leads to being in debt and poor for most people. Keep it up Best regards, Barbps I'm including this post in my link round up tomorrow!
Thanks Barb,I can't wait to see your round up! This is one of the most important lessons I learned. After getting out of school, so many of my friends were starting down the path of excessive debt. I to dabbled for a short period (a few months). I am so glad someone talked some sense into me before I did any more damage. It literally took in excess of two years to clean up the mess that I made. The flip side is now I am able to build wealth faster than I use to dream about and can have some really cool fun while I'm doing it. The sacrifices have been worthwhile. I'm glad I chose the better portion.
I asked why he came along if he wasn't making any money. He smiled at me and charismatically said, "It's easy for a rich man to act poor, but it's hard for a poor man to act rich. Now let me show you something. I just wanted to say thank you for the complement and for writing about your own "real life" version of Barbie and Ken. We need more people who are willing to challenge the current dogma that being in debt is the only way function financially.
I love that story!!! There's so much truth in that statement: it is hard for a poor man to act rich!You are so welcome. Thank you for commenting. There was a shift in my thinking when I decided there was a way to function outside of debt. I began to get more creative about alternative strategies to live a great life and more confident that the system is designed to keep people broke (even if that's not the intention). Regards,Shawn
After getting out of school, so many of my friends were starting down the path of excessive debt. I to dabbled for a short period (a few months). I am so glad someone talked some sense into me before I did any more damage. It literally took in excess of two years to clean up the mess that I made. The flip side is now I am able to build wealth faster than I use to dream about and can have some really cool fun while I'm doing it.
I loved your post! I think many of us can relate to it. I just published the true story of Patty and Gil, seems like they're the real Barbie and Ken (from your post) although not so broke anymore, they had their share of debts, but managed to pull through. Very well written, thank you. http://www.makemoneyonline-review.com/debts_credit
Tori,I just wanted to say thank you for the complement and for writing about your own "real life" version of Barbie and Ken. We need more people who are willing to challenge the current dogma that being in debt is the only way function financially.
This a great post. Have you read "The Millionaire Next Door?" It discusses how most rich people in America are quietly living among middle class folk. They're millionaires because they don't drive fancy cars, they don't wear expensive clothes, and they don't live in huge houses.
I absolutely love "Millionaire Next Door." It is by far one of the most comprehensive studies on millionaires and a gold mine of information. I often buy this book for friends. Thanks so much for the feedback.
Very interesting article. It reminds me of a guy I met years ago while my father and I were traveling to flea markets throughout the north eastern United States, selling exotic Native American artifacts. From time to time, my father would bring along this rather shabby looking fellow that wore beat up coveralls and emanated a body odor resembling the essence of onions. He was quite, smoked a lot of cigarettes, and brought along a few items that he would sell for a dime or a nickle. I asked why he came along if he wasn't making any money. He smiled at me and charismatically said, "It's easy for a rich man to act poor, but it's hard for a poor man to act rich. Now let me show you something…" He reach into the center pocket of his coveralls and pulled out a plastic zip lock bag. As he revealed its contents my eyes nearly popped out of my head. He unfolded 100 dollar bill after 100 dollar bill. To this day I have never seen some much actual cash at one time. There had to have been at least 10K in actual cash. It was incredible. Anyway thanks for bringing back the memory.
Your comment and story really embodies the whole point of the article. Thanks for sharing!
What a great post – inspiring I think is the word I want!Frank @ Debt Advice
Shawn, Yes, yes, yes. It is so important to get the word out that living rich leads to being in debt and poor for most people. Keep it up Best regards, Barbps I'm including this post in my link round up tomorrow!
Thanks Barb,I can't wait to see your round up! This is one of the most important lessons I learned. After getting out of school, so many of my friends were starting down the path of excessive debt. I to dabbled for a short period (a few months). I am so glad someone talked some sense into me before I did any more damage. It literally took in excess of two years to clean up the mess that I made. The flip side is now I am able to build wealth faster than I use to dream about and can have some really cool fun while I'm doing it. The sacrifices have been worthwhile. I'm glad I chose the better portion.
I asked why he came along if he wasn't making any money. He smiled at me and charismatically said, "It's easy for a rich man to act poor, but it's hard for a poor man to act rich. Now let me show you something. I just wanted to say thank you for the complement and for writing about your own "real life" version of Barbie and Ken. We need more people who are willing to challenge the current dogma that being in debt is the only way function financially.
I love that story!!! There's so much truth in that statement: it is hard for a poor man to act rich!You are so welcome. Thank you for commenting. There was a shift in my thinking when I decided there was a way to function outside of debt. I began to get more creative about alternative strategies to live a great life and more confident that the system is designed to keep people broke (even if that's not the intention). Regards,Shawn
I really liked your article. Keep up the good work.
Thanks so much for stopping by and leaving a comment!
After getting out of school, so many of my friends were starting down the path of excessive debt. I to dabbled for a short period (a few months). I am so glad someone talked some sense into me before I did any more damage. It literally took in excess of two years to clean up the mess that I made. The flip side is now I am able to build wealth faster than I use to dream about and can have some really cool fun while I'm doing it.