Life, Liberty and Financing Happiness 

Our consumer economy has grown accustomed to financing everything…homes, cars, education, TVs, mobile phones, vacations….you name it, capitalism and the market economy has created the opportunity to transform our seemingly endless hunger for consumption into a payment plan. It would now be considered a luxury, almost hard to imagine, to actually own your home. Most of us aren’t really homeowners. Our homes are owned by a lender somewhere, that doesn’t know us or care about us. 

Mortgages make up 67% of the average American’s debt and auto loans make up about 10% ….we have nearly 14 trillion dollars in consumer debt in the United States alone. What do we own anymore besides the abundance of trinkets and trash that are stuffed in our closets and storage units? Wait, we may not even own that given our 1 trillion dollars in credit card debt. 

The challenge is apparent. Consumerism has created the need to consume, whether we want to or not. As individuals, when our flow of income is lost or reduced, whether voluntarily or not, the dramatic cash decrease demands a drastic change in our consumptive lifestyle but unfortunately, we are unable to turn it off as quickly enough to avoid massive disruption.

 

The “capitalism tax”

Capitalism and the market economy have created a “damned if you do, damned if you don’t” conundrum. The challenge is that nothing is really worth the asking price. Homes only have their value because of mortgages. What do you think would happen to the value of homes if the mortgage industry disappeared? Do you think a new car is really worth the asking price or more likely it is based on the monthly payment the average person can afford?

The closer you live to a location that has the allure of capitalism, the more it will cost you to go about your daily life….eat, play, survive. As the old saying goes, it is “cheaper in the country” and part of the reason is that you are physically further away from the trappings of capitalism. On the flip side, of course, compensation is normally less “in the country” as well. 

If your job (or business) provides enough inflow to support the “capitalism tax” than you will likely experience less impact day to day but you are also more likely to get unwittingly trapped. You make enough to get by, maybe even save a little along the way, but if a few things get out of hand, you can quickly end up with next to nothing.

 

Why is there a “capitalism tax”?

The financial services industry (i.e. banking, insurance, investments, lending) is in business to generate a profit and they pay their bills with your money so, in the end, the consumer has to end up with less than she started. It is basic math. 

They take little bits (or lotta bits) of your money, year in and year out. How do you think they can afford to splash their name on stadiums and museums? They can do all that and create ads to ask you “what’s in your wallet” and pay millions and millions of dollars in bonuses and manage to stay in business….with your money! 

Do you think there is a credit card that really and truly pays you back? It pays you back a smidgeon of what you paid the market economy to consumer more than you needed or perhaps, even wanted. 

Investment firms take their management fees on your money day in and day out no matter how well or poorly your investments perform. The market is tanking but they are still making money. Plenty of it.

Over the life of your 200k, 30-year mortgage, you’ll actually pay your lender nearly 500k, or 2.5 times the value of the loan.  

We are all paying dearly for the consumer economy that we have created and continue to fuel. Our current global pandemic in 2020 is showing us how vulnerable and fragile we all are.

 

So What Can You Do?

First and foremost, your primary goal and the best rate of return is to eliminate any and all personal debt. I know I am not the first person to make this statement and I know that in today’s society this is much easier said than done and again, because of the “capitalism tax” it requires a massive amount of creativity and ingenuity for many of us.

Next, is to eliminate and reduce any and all monthly obligations or do what you can to ensure that they can be canceled at a moment’s notice. You’d be shocked how many monthly obligations we have that we are unaware of because they are paid by ACH or a credit card.

Challenge yourself to live by what you truly need and find ways to create a “shared, bartered and found” personal economy. I have begun painting in earnest and I am limiting myself to using materials that I find or have donated versus purchasing.

If you have leftover money to invest and your employer offers a 401k, contribute up to the employer match. That is a guaranteed 100% rate of return once you vest (typically around 4 years). Your investment options will be limited. I recommend investing in the lowest cost possible index funds. I have completely exited the stock market, not because I do not think you can earn a return on your money, but because of the misuse and abuse of the market for gains that I believe are not in the best interest of humanity, and unfortunately, most consumers end up with less than if they had they invested in simple bond index funds over their lifetime.

 

Where to invest any additional funds?

Personally, I am focusing on the fundamental needs of humanity, a roof over our heads and food in our belly. There are various options I am considering through a type of IRA called “self-directed”.  SDIRAs is a type of individual retirement account (IRA) that can hold a variety of alternative investments normally prohibited from regular IRAs (i.e. banks and brokerage firms). 

Overall, I recommend investments that pay a return in some form of interest or dividend. We tend to live off of the funds produced by the assets we own during our lifetime and we have the option of leaving the principle to people or organizations that can put your remaining assets to good use. 

 

Imagine if…..

All of the assets that we collected over our lifetime went up in a pile of flames when we died? Or were left to the good of the community vs our current mindset of “ownership”? We are inhabitants of this planet for a brief moment. We don’t own anything. This idea was created by humans and it will die with humans. It is all made up. It isn’t real. Let it go. Share. Give. Love. Be. In the moment.