Recently, I read a book called Body by God, and it has been eye opening. It’s not that the book is introducing any new concepts as it relates to health. It’s just that the light bulb has finally gone off. I have learned that I am what I eat. I must have heard that thousands of times before it finally clicked. Clearly, what I considered a normal diet was not normal at all. It got me thinking that what many of us consider normal spending is not normal at all. Few of us have learned to distinguish between our wants and our needs and as a result, we continue to struggle with our finances. I also realized that most of us know that the way we are currently handling our money is not in our best interest. But, we are just not sure what to do about it.
Americans in the 21st century are accustomed to consumption that cannot be sustained. Too many of us these days feel deprived with what we can buy when we live within our means. Americans are quick to tell you they are short of money. Indeed, this is the most common reason people give for not giving to those in need, saving for retirement, buying health insurance, or making other prudent financial choices.
Are Americans in general short of money for basic needs? Consider this:
One in four Americans gambled at a commercial casino in 2004, spending almost $30 billion, not including gambling on Native American reservations or online.
Americans spend over $34 billion a year on pets, including liposuction; pet swimming pools, with lifeguards; organic pet food bakeries; plots in over 800 pet cemeteries, some with weekly flower deliveries to individual graves; and custom-made parakeet caskets.
Americans will spend around $23 billion on digital TVs this year and similar sums on other electronics, including $3 billion on customized ring tones and the like.
Americans annually spend over $65 billion on illegal drugs, $45 billion on alcohol, and $167 billion on smoking-attributable costs.
Americans spend $70 billion on weddings, $13 billion on chocolate, and around $10 billion on bottled water.
The problem: This consumption pattern is changing American’s perception of what is normal. When I was growing up, weddings took place at church, and the reception was always held in the church hall and offered wedding cake, nuts, mints, and punch as refreshment. Now the average wedding costs over $26,000. Young people today feel deprived having the kind of wedding that was the norm only a generation ago simply because we’ve super-sized normal.
For many Americans, normal is consistently spending more than they earn. Over 70% of US households at the lower end of the income scale overspend. That’s not a misprint. And, 15% of households in the very highest income brackets, outspend their income.1 These are breathtaking statistics. They are even more alarming because Americans no longer have the same government or corporate safety nets to pay for their retirement and health needs. Over the next generation taxes will have to increase over 50% across the board just to maintain existing entitlement programs.
Why is this happening? It is not because human nature has changed -- it hasn't. It is because we live in a period when, for the first time, it is easy for most people to separate consumption from payment on a massive scale. With credit easily available, people buy now, enjoy their purchases immediately, and don't think about payment until much later. Scientists studying human behavior tell us that when given the opportunity, most people will buy into this lifestyle. Describing in economic or moralistic terms the future problems this behavior is creating is no match for the adrenaline rush instant consumption produces.
So, what is the solution? The answer is clear, but unfortunately, not always easy to apply. When we want to control our weight we employ discipline and diet to our bodies. Now, we must apply the same things to our finances. For, just as our bodies suffer when we choose to fill them with junk, our financial health falters when we choose to fill our credit cards and checkbooks with unnecessary (junk) purchases. In the end, we pay for it with bad credit, bounced checks, and mental anguish.
One thing that often helps people change their eating habits is to gain some perspective. Maybe it’s a good look in the mirror; or a look at your old wedding photos; or, for some, a disconcerting doctor visit. Whatever it is, there is a defining moment where we realize we can no longer continue on the path we are currently taking. It’s the same thing with our financial situations. One thing that may help us curb our financial diets is to compare our own financial situations with others around the globe. To help us gain some perspective, I have come across a website called Global Rich List. It can be found at http://www.globalrichlist.com/. All you have to do is enter your income and you find out rather quickly how you measure up with the rest of the world. For example, if you earn $50,000 per year, you are in the top .899% richest people in the world. In other words, there are 5,946,042,435 people poorer than you. Let this be that defining moment that puts you on the path to financial health.
1 CFP® Board
Steve Scalici is a Certified Financial PlannerTM with Treasure Coast Financial. He is co-host of God’s Money, which can be heard on the internet at www.oneplace.com. You can contact Steve at email@example.com. To book a speaking engagement, contact Nannette Lewis firstname.lastname@example.org.