WYSIWYG is an acronym often used in web programming which stands for “WHAT YOU SEE IS WHAT YOU GET.” WYSIWYG may be accurate in HTML5 coding or JavaScript but it doesn’t hold up in the world of wealth planning. What I mean by that is, “What you see from the curb of a household, isn’t what is behind the front doors of most American households in regards to actual finances.”
If you live in a suburb of a large U.S. city (I live in Atlanta but pick a city, any major city), there are neighborhoods after neighborhoods of beautiful homes, with fancy cars in the driveways, kids that are attending private schools, fine dining, vacations, club memberships and many other “visual signs of success.”
But what if I told you that much of that is what I call, “All show and no dough!” In Texas, they have a saying that is, “Big hat, no cattle.” You see, there is a game that is being played out there where everybody is trying to keep up with the Jones’. Unfortunately, the Jones’ are up to their eyeballs in debt and are teetering on the edge of financial disarray.
Unfortunately, this can all play mind games on those who really are building wealth because it will appear that so many others are living this glamorous life with all of these luxury items. That will leave the prudent scratching their heads and shrugging their shoulders while saying, “I don’t get how they can afford that?”
One of the advantages of being a financial advisor is that I get to see what really is happening behind the curtains. I get to see the real success stories (the people that really do have the dough). I also get to see the flame-outs and those households that disappear into financial obscurity (crash and burns, financial blowups, bankruptcies, KA-BOOM!).
Here are 4 items that could be used to keep you sane in an insane world:
- Most households are nowhere near their retirement numbers. They are under saved, under –invested and far over-leveraged. Run basic numbers on two households that both have $250,000 of annual earnings. One saves 20% ($50,000/annually) while the other saves next to nothing and uses those funds to make minimum payments on levered purchases. I can assure you that $50,000/annually going to minimum payments on borrowed money can make you appear to be Mr. and Mrs. Big Shot. It all is great until you have to pay the money back with interest while your $250k of annual income starts shrinking (Oh, fun times! Fun times!)
- Americans have a fascination with large homes and fancy cars (two items that suck up cash flow and are just whopper lifestyle expenses.) They purchase these items using debt (often committing themselves for 30 years at a shot with mortgages).
- People are far more interested in their immediate social status than their long term financial well-being. Fake it until you make it (or you blow yourself to financial smithereens because you have bad financial habits that eventually catch up to you.)
- The fakers don’t shake out until later in life once they have earnings interruptions. By then, you will have moved on to an easier lifestyle while they seem to have disappeared off the face of the earth. Nobody ever brags at a cocktail party about how their home is being foreclosed on or how they have to move in with their kids in retirement. Financial fakers have a funny way of wandering off into never-never-land never to be heard from again (I don’t think Facebook will be their tool of choice to update you on their financial status later in life…)
Wealth builders have an ability to tune out all of the financial distractions and the appearances of success while they quietly build up a financial fortress. They aren’t trying to keep up with anybody other than themselves. They don’t let social status divert them from their own specific long term goals. It doesn’t matter to them if somebody else just got a bigger house, a new car, took a private jet to Tahiti, or joined the most expensive country club in town.
- They know their own numbers.
- They know their own plan.
- They are true to themselves.
Wealth builders have a quiet self-confidence within them and can follow their own path on their own time frame.
That doesn’t mean that wealth builders don’t sometimes wonder how everybody else around them seems to be living the fat life while they are grinding forward on their own terms often making financial sacrifices (like saving and investing rather than blowing all of their current earnings). Rather, they just have confidence that with time, things will play out the way they should and that the discipline and good decisions along the way will pay off along the way.