Sunday, January 3, 2016

Keeping up with the Joneses

While enjoying my time off during the holidays with my family and friends, I heard quite a few “keeping up with the Joneses” stories. One particular story involved my wife’s friend buying a fancy new BMW SUV for a daughter who recently got her driver's license. This is because the friend’s cousin bought a nice Mercedes for her daughter. What's wrong with these people? For sure, my son will not get a new BMW. 



Maybe it's a small town thing. You need to the big fish. 
A lot of people want to be out of the rat race, be it it early retirement or financial independence. But the truth is, the economic system is designed to work the other way. Everyone wants the American Dream with house ownership, large cars/SUV. Unfortunately, this just keeps you in the rat race. If you look at it, even our 401k and our complicated tax code are set up such that the majority works their 9-5 hours, and in many cases more, until we reach retirement at 67. The system is designed for people to spend beyond their means and go into debt. 
However, from the perspective of the general society, this is a good thing. If everyone is frugal, saved and invested their savings, then the economy as a whole will collapse. Reduced spendings will mean a lot of companies will go under. Think about the chaos. Perhaps less freedom. It's no wonder that the public education does not teach you the basics of economics and investing. 

The Matrix


It's like the Matrix. If everyone broke out of the matrix, then the matrix will not have the power to continue. Therefore, we actually want people in general to overspend. We want them to live the American Dream. Go ahead, buy your dream car. Ignorance is bliss. 
Just like the matrix movie, the system allows a few to break free. For the ones who seek it, financial independence is absolutely possible. Compared with the general population, these folks are living outside the norm, frowned upon. Even weird. Or sometimes, they're your next door neighbors but you don't know that they are millionaires.

Living within your means

Living within your means is an a actually an easy thing to do. It is just a mindset change. Saving and investing can also be simple if you keep it simple. All you need is time. And a lot of patience. If my wife’s friend invested the $40-50k in some good dividend growth stocks instead of buying the car, that investment will bring in around $2k per year which can double every 8-10 years or so. By the time the daughter is 40, she will get a nice stream of passive income. 



But society and the marketing machines from our beloved companies are set up for you to spend, spend, spend. Credit card companies want you to load up the debt (otherwise you are a deadbeat). For me, all of this is good. Please spend away on the cars and all the fancy stuff. Please keep up with the Jones.

D4s

BTW-- My vacation is over. My regular life resumes tomorrow. 



14 comments:

  1. Thanks for the reminder D4S. I hear ya loud and clear. The game won't be understood by the majority so let's just do our thing. It's clearly obvious the government wants most of us to not understand how finances work so it's not taught in school.
    Lucky for us, we are a part of Neo and Morpheous's crew... so we are very fortunate :)
    Cheers to us buddy.

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    1. Div Hustler,
      Yes. We are fortunate to see the craziness of uncontrolled spending. It's all good for the economy so we can sit back and watch our dividends grow. Thanks for visiting!
      D4s

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  2. Man, aside from the obvious issues with a high end car for a kid ... kids are just learning to drive still and often wreck their first vehicles.

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    1. Div Chimp, you are right. I actually heard the cousin's daughter smashed her car into a light post. Ouch. Fortunately, no physical injuries.
      D4s

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  3. Some people spoil their kids rotten. I know of an 8 year old who has 3 TVs in his bedroom alone because he has 3 game systems. A lot of teenagers have cell phones and usually the top of the line ones like an iPhone. I do not have an iPhone, but my cellphone makes and receives calls and texts.

    Then you have people in their 20s to 60s spending tonnes of money on house renovations. In Canada, David Chilton says the major cause of financial problems in Canada is home renovations.

    ReplyDelete
    Replies
    1. Thanks for your comments! I am not sure on the political situation in Canada, but our government controlled by lobbyists, which are funded by powerful companies and individuals. In terms of my article, it is clear that the government wants us to spend, spend, spend. This is not a bad thing if you are on the receiving end.
      D4s

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  4. Hahaha yeah that what I say too: "Please keep up with the Joneses" while I check out of the system.
    That is a messed up mindset to buy new SUVs for teenagers who are just learning how to drive. Talk about cementing the entitlement mentality. People like us who are on the path to financial independence sure are bad for the economy - as we are frugal and put the brakes on the velocity of money at a micro scale.

    My vacation has come to an end too. I have the Monday blues :(

    R2R

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    1. R2R, it's different if we are on the receiving end. The public spends based on everything we see on tv, government policies etc. companies grow their earnings and increase the dividends. We get paid more in dividends. It's lucky that people who think like us are in the minority. Thanks for your comments.

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  5. "Compared with the general population, these folks are living outside the norm, frowned upon. Even weird."

    When I was transferred to Ottawa, Canada, in 2014, I sold my house (at point of departure) and rented one in Ottawa. Even today, coworkers ask me when I'm going to buy. It's beyond them that I make well over 6 figures and am renting. And it's beyond me that I make so much and yet cannot buy a decent house in a well-located neighbourhood.

    Everything has its time. When more jobs are lost (Canada is bleeding jobs at the moment), mortgage rates creep up and housing prices decrease, I'll be there to take full advantage of a poor soul. Until then, dividend growth stocks are more appealing than Canadian real estate.

    Cheers

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    1. ADY,
      Thanks for your comments. A house is just a place to protect you from the elements. I agree though. All in good time. Some folks prefer to rent. As for me, my old self will buy the biggest house possible. My new self is content with as small as possible.
      D4s

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  6. I got a hand-me-down car from my brother :) which I'm forever grateful to him for giving me his car. My Dad couldn't afford to give me a car, and I didn't have the fund for it. If I have a kid, she/he would not get a brand new car. My brother who now does very well financially didn't give his children brand new car either.

    People need to show their flashy flashy stuff. If you watch "American Greed" on CNBC, those scammer always have the biggest house, and the biggest and baddest cars so that it would give the impression that they are doing well financially, whatever funds that they are managing is on the right, fast track to the GREAT wealth. Most people who end up losing money.

    But then, there is a the real super rich, they do whatever they want with their money LOL :) In this case, buy Mercedes and BMW stocks LOL :)

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    1. Vivianne, if you can afford it, then go for it. That's the top 1% or higher. The rest of us should be smarter - but again, I won't stop people from spending lavishly and showing off. It's a good thing for us eventually.
      By the way, my brother handed down his old Ford Fiesta all these years ago which I drove for 5 years. Fun times :) but definitely not a Lexus.
      D4s

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    2. I used to hate hand-me-down stuff, because when things go to me (I'm the youngest of 10), things are missing or broken. I secretively feel "ashame" compare to my schoolmates. But when I grow up, now, my sister give me some of her stuff, I'm happy to take them LOL :) Good times!!

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    3. Vivianne, I know exactly what you mean! Being the youngest son I n my family, I was in a very similar position. It definitely made me more appreciative of the new thing I can get. My son doesn't know what it's like unfortunately. Hopefully, I can tell him some fun stories.
      D4s

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