Our anemic economy appears to be struggling further still. By the end of the week, the “soft” stock market became downright cotton candy-ish, plummeting to index lows we’ve not seen in some time.
The culprit? Well, there’s a few of them…and they remain the “usual suspects.” On the mortgage front, we were greeted this week with the cheerful news that a record 9 percent of Americans who have mortgages are now either behind or in foreclosure; almost 1 in 10!
The jobless rate? It is now the highest it’s been in five years. As for oil, sure it’s come down from record prices here recently, but let’s be honest – gas at $3.65 a gallon is still irritatingly high. In short, things are lousy.
Most people will eventually exit these tough times relatively unscathed, but many will be battered and bruised nonetheless. Still, once things return to “normal,” it will be tempting for a lot of people to resume the consumer patterns in which they’ve engaged all along, buying and buying, largely with credit, seeking as much house, car, and big-screen TV as they can possibly afford.
My advice? Fight that temptation, taking stock of your life and of what we’re going through right now, and endeavor to give yourself the greatest gift money (or credit) can’t buy: peace of mind.
Financial serenity comes about only one way: By living a simpler, less materialistic existence. Granted, we all like a few creature comforts, but the emphasis in the lives of many has been on creature, as in possessions that tend to devour us in one way or another.
Take cars, for example. How much car do you really need? How big does it have to be? How many options does it have to have? How new does it have to be? The reality is that cars are made so well nowadays that they’re expected to go well over 100,000 miles if properly maintained.
From a financial planning standpoint, car payments are a colossal waste of money, and yet too many view the idea of always making a car payment a fact of life. Why? Why not purchase a solid used car, and when it’s paid off, hang on to it for as long as possible, and investing the car payment you would be making during that time into growth mutual funds?
Look at this: If you bought a modest used car with the intention of making it last 10 years, spent three years paying it off…let’s assume a car payment of $350 per month…and then took that same $350 and invested it in a quality stock mutual fund for the remaining seven years, you would end up with just under $41,000 set aside (assuming an annualized rate of return of 9% per year). AND, if your car is still running fine after your 10 year time frame expires…just keep driving it, pushing back the initiation of another loan while continuing to add to your net worth.
I’m picking on car payments right now…they are an easy target for the financially prudent…but what I’m speaking about is applicable to just about any high-dollar consumer good. What about houses? We all need a place to call home, but how much house do you really need?
In fact, depending on the market in which you live, you may well be better off renting now than buying, which is an idea that likely goes against what you’ve always been told. What about other big-ticket items, like consumer electronics? I like football as well as the next person, but I don’t need to watch it on a $3,000 TV. The list could go on and on here, but you get the point.
Those Joneses with whom you’ve been trying to keep up all these years, with their McMansions, new cars, home theaters, etc? We now know their dirty little secret: They weren’t wealthier than you; just more extended. Indeed, becoming “stuff-obsessed” rarely adds to wealth, but rather diminishes it instead.
I’ve heard it said that the less you possess, the less you are possessed. Given the extraordinary high cost of possessing things at all in these trying economic times, perhaps it’s time we all reevaluate our priorities, dig deep within ourselves to locate that which is truly important, and adopt the best strategy in the world against the high cost of consumerism: avoiding it altogether.
Robert G. Yetman, Jr. Contributing Editor – www.ChristianMoney.com