There are two types of poverty in the modern world. One form, the more obvious of the two is scarcity of money. The second form is slightly less obvious to those who are caught up in the social norms. Those who belong to the second category may be able to make enough money to service the monthly payments on a big house, new car, expensive clothes, and spending habits. You may call them the “middle class” but I call them the second variation of poverty. Money may not be as scarce to them as the first group mentioned, but the label of poverty is earned by scarcity of something much more valuable. Their time.
Are the big house and new car really worth the time that was exchanged for them? This is your life and it’s ending one day at a time. This is all you get. This is something you can never get back. Just because you’re born into a culture that places huge importance on career, wealth, consumerism, and superficial nonsense, doesn’t mean all those things are worth the opportunity cost of exchanging years of your life.
I believe that 50 years from now, people will look back on our culture, our way of living, and the hours we worked the same way we currently look back on factory workers at the beginning of the industrial revolution. It will be absurd to them to think that people actually used to do that, and rightfully so.
What good is a decent salary with benefits if you never have time for your family? Your hobbies? Things you truly used to enjoy about life that slowly faded away and are now just a memory. One day I’ll start doing that again. But that day never comes. What’s the alternative? Monetary poverty? No money to buy stuff. No house, no nice car? That’s not something most people are willing to face so they keep on, keeping on. More years of work, more days stuck in rush hour traffic, more unpaid overtime, more years of your life sacrificed at a set wage, for the greater benefit to someone else; an owner, a shareholder.
We spend money, take on debt, spend years of our lives in college, anxiously chasing a degree so that we can be sold off into slavery into a career that will never give you enough income to stop showing up for more than the few weeks we’re granted for vacation each year. What’s the point of playing a game you can’t win? Why is it that the vast majority of the population is so accepting of an awful quality of existence, simply because everyone else seems to be going along with it?
To me, time is a currency significantly more valuable than money. To spend 5 days a week on work, commuting to work, getting ready for work, tacking on another hour for a lunch break, thinking about work, sucking the energy out of me, making it much more difficult to enjoy what’s left of the day afterwards is insane. Why do I do it? Because all those years of schooling, undergrad, MBA, never once mentioned how to create value which can be exchanged for money outside going to work for somebody else. I was never taught how to make money. I was taught to get a degree, make a resume, go on interviews, and be happy working perpetually under the authority of someone else, controlled and rewarded like a trained monkey.
I don’t think I’ll ever be happy working any type of job in banking, or for any type of corporation for that matter. I’ve bounced around enough to know that yes, you can always increase your salary in different roles, but the pyramid structure, the unexplained advancement of some of the biggest weirdo’s I’ve ever met to higher management positions, with the simultaneous exploitation of the truly competent, passing over of those who possess actual leadership skills is the one constant that remains. One more thing that remains permanent is the amount of time that’s leeched out of your week.
There has to be a better way, and many people have already found a better way. Although a minority, self-made entrepreneurs are thriving and willing to share their stories with anyone who cares to listen. Their results can be replicated by those who are driven and persistent enough to walk the path they’ve cleared.
To illustrate my point of group think, following the herd, and how the most popular path is always the wrong path, let me give an example. What is the worst investment an individual can make? Purchasing an automobile. The second you drive a new car off the lot, its value tanks. But people do it every day with a smile on their faces. If you bought a stock and it immediately tanked 20% you’d be infuriated, but when you purchase a car you can care less. People acknowledge your purchase, notice you, pay attention to you, and sometimes even congratulate you. (How bizarre. All you did was spend/borrow money and make a purchase. Not exactly an achievement)
When you purchased that vehicle there was an opportunity cost. Let’s say it cost you $25,000. That vehicle will fulfill the purpose of taking you from point A to point B for quite some time, but that purpose could have been comparably fulfilled by a used vehicle costing a fraction of the price at $9,000. When you’re ready to move on to your next vehicle you can sell it, or trade it in to a dealer who will only give you enough to guarantee they can make a profit off of it, and the difference between what you paid and what you sold for will be lost forever. While owning that vehicle, unless you’re driving for Uber, it generated no income or return on investment.
What if instead of purchasing a new vehicle for $25,000 you decided to keep the one you have, take that $25,000 and purchase a multi-unit residential property? This would cover the down payment and closing costs. You would take out a mortgage to finance the remainder of the purchase after making sure the rent would easily cover the payment along with all other expenses, leaving you with an extra $10,000 in income each year while increasing your equity.
Now you own an income generating asset, you’ll get your initial investment back in 2.5 years and after that you continue to make money while build equity as the principal balance is paid down. When you get your initial investment back in 2.5 years you’d now have the property AND the cash to buy the new car. But after experiencing how this works firsthand, would you then buy the car? Again, the opportunity cost remains. You could get the car, or you could get another similar property, turn on another income stream and double up on that rental income. Lastly, the property has the potential to appreciate, something highly unlikely to happen with a car.
So why is it significantly more common to see someone purchase a new vehicle as opposed to investing their money into an income generating asset of any kind? Partially because self-indulgence is easier and people are more emotionally driven than they are logical when it comes to money. Partially because of advertisements, social conditioning, insecure consumers trying to play off of conditioned responses to branding of a particular car maker that tells you by purchasing their product you will have status. Decades of marketing, use of their product in Hollywood movies, and images of high status individuals in these vehicles have hypnotized the masses to respond to car brands in that way, and to some insecure individuals that’s enough for them to sacrifice getting a return on their investment, and bettering their quality of life just to drive around in a vehicle that no one really cares about, while the value of that vehicle tanks just as fast as the positive feeling the purchase initially gave you.
There’s a reason you don’t see advertisements telling you to invest your money as opposed to consuming stuff you don’t need (unless there’s a third party with a commission to be earned). Those people who are investing this way don’t want the market to be flooded and their opportunities to evaporate. Let the masses blow their income (which took months of their lives to earn) on a vehicle that will end up being worthless, often times financed through a bank with additional interest expense. ($25,000 financed over 5 years at 5% results in $28,307 total payments with interest. Paying more in interest doesn’t increase the value of the vehicle. Just another sunk cost.) The more of them who dispose of their income this way, the less that will have the money available to bid against the investor on his/her next real estate investment.
The opportunity to escape the time-deprived form of poverty exists for all of us within the decisions we make on a daily basis, whether or not we’re aware of it. Compound the car purchase example over a lifetime and the financial well being of the person who buys the car, compared with the one who begins to invest, and continues to take the earnings from the investment to acquire even more income producing assets, and the destination of each will be drastically different.
On one hand, 5 years after the originally decision was made, you finally pay off that car loan. On the other, 5 years later you own two income producing properties, you’ve gotten back your $25,000 investment twice already, you’re equity continues to grow, and you now have the opportunity to acquire an even larger property. Now project each path out 10 years, 25 years, 35 years. Talk about contrast. One path leads to having the resources to take that vacation, to pay your child’s tuition, to retire early, to give something back. The other, leads to struggling to make ends meet, one lay off, or setback away from defaulting on your loan payments and filing bankruptcy, knowing that retirement just won’t be an option any time soon.
Be sure to make disciplined decision with long term foresight when it comes to your personal finances. Have clearly defined values of what you truly want out of life, and what it’s going to take to achieve that. Without a purpose, without a destination in mind you will continue to float around aimlessly, much more easily coerced into indulging in an emotionally driven purchase decision by a savvy sales person who has a stronger conviction about what they want out of you, than you do about what you want out of yourself, for your own life.
In closing, consumerism will tank your future just as much as it will tank the condition our planet ends up in in decades to come. The intelligent and constructive path is just that on multiple levels.
“Chase that comparison moment. You have the old thing, you want the new thing. Yes! Do it. Be happy for a week. Ignore the fact that happiness comes only from the moment of comparison between the old and new. Once you’ve had your new thing for a week and it becomes your new normal just go seek happiness from another new thing.”
Thanks for reading. For more finance related discussion check out Empowering Mindset For Financial Freedom and Perseverance.