According to a study done by NYU economist Edward Wolff, 84% of stocks are owned by the richest 10% of American households.
Even more extreme than this is the fact that the top 1% hold 50% of all stocks in America. Meaning a teeny tiny amount of Americans own trillions of dollars, and a vast majority own nothing. That type of inequality is just sad.
So many Americans are locked out of a real wealth machine by not being invested in Mr. Market.
Who is Mr. Market?
The New York Stock Exchange (NYSE) is an American stock exchange on Wall Street in New York City. With a market cap of more than US$16 trillion, the NYSE is the world’s largest stock exchange, averaging US$169 billion in daily trading value in 2013.
That would mean the richest 1% own approximately $8 Trillion worth of stocks.
Sadly, only 52% of Americans were invested in stocks.
GALLUP
Let’s fast forward just five years.
According to Barron’s, the stock market is worth $30 Trillion as of 2018. You see that?! The stock market has almost doubled in size! This is tremendous.
In 2008, most portfolios lost half of their value. Now look at us today. The S&P has more than tripled since the Recession! A trillion here, a trillion there and boom we have almost double the assets we had in 2013, the same year LeBron won his second championship ring with the Miami Heat.
Therefore, as of last year the richest 1% now own $16 Trillion dollars of wealth in the stock market.
The richest 10% has a mind-boggling $25.2 Trillion in stock wealth! Each owing over $900,000 in stocks.
Keep in mind that the bottom 50% of the poorest households have virtually no wealth as many have $0 in savings and investments.
The U.S. stock market has been on fire as it returned 22% last year.
With a 220% increase over the last decade, that means the rich are getting richer.
You need to get a piece of that stock pie in the sky
Why is it so important that you invest in Mr. Market? It’s simple. Investing is how you beat inflation.
With inflation averaging 2-3% annually, you must find a way to out run it. Investing will help you do just that.
I do not want you to miss out on the next $8 Trillion the market may gain over the next decade or so. Don’t sit on the bench! Get out there and get in the game! Nothing ventured nothing gained.
Wealth building takes time.
It’s a long game. You may need a decade or more to build some significant assets.
Did you that know with an interest rate of 10% your money doubles every 7.2 years? It’s true. It is because of the rule of 72, which states that a certain amount of compound interest will dictate how much you can earn over time.
I feel like that scene in Oliver Twist when he asks for more. But instead of food, I want dividends! My advice t to you is to invest!!!
Yes, give me some of that compound interest. It’s raining dividends and capital gains.
The first $100,000 is the hardest!
No matter how much you earn, it will take time to grow your wealth to something much grander over time.
Even with a nice return, the majority of your first $100,000 will come from your savings. The higher amount you save, the faster you achieve this goal.
I cut back on everything to get to through this first hurtle on the wealth accumulation phase.
I skipped the movies, $7 lattes, fancy vacations, new cars, clothes, subscriptions services, and nights out on the town. Put that money to work. Don’t act rich, get rich!
I know some guys that want to be rich, but spend like the world is flat like Columbus said; so they think we are going to fall off the edge and it is all going to end tomorrow, so you gotta treat yourself!
These poor souls decided to buy bottle service for a friends 45th birthday. The cost: $4,000! They split it between like four or five people.
Here is a little background on one of the fellas, let’s call him Scotty.
Scotty is still renting after being unable to afford to buy a home. Instead of banking his money for a down payment, he’s tossing around G’s more than Floyd Mayweather after signing a $100 million-dollar deal.
Sorry my man, hate to break it to you, but you ain’t “Money” Mayweather and don’t have his bank account.
Forget that! I would rather be financially independent than act rich for a couple of hours.
And the ladies loved that he spent that $1,000 on that bottle service. But then you know what happened at the end of the night, when the lights came on? All the ladies left!
I guess it was all about the bottle service. That’s just money down the drain right there. Bad money decisions happen everyday.
Maybe it really is like Jamie Foxx said, “blame it on the alcohol.”
Regardless, I want you to put that money in Mr. Market and let it grow.
If you are worried about downturns, then hedge your bets by putting money into savings as well.
Since it usually takes about 10-16 months for the stock market to recover from a crash, keep that amount of money in your savings. This will let you ride out the storm.
The goals is to not have $0 in your bank account. Something is always better than nothing.
Now save up that first $3,000, go open up a Roth IRA with a discount brokerage firm and go get started.
Don’t have $3,000 just lying around? No problem. If you can spare $100 bucks?
If so, then you can use the Automatic Asset Builder that lets you invest for just $100 a month with places like T. Rowe Price or Charles Schwab.
Now let’s go get this money. No excuses! I just gave you all the information you needed to get started.
Happy investing! And may the odds be ever in your favor.
Just one huge monthly payment could be killing your ability to build wealth. He hit the nail on the head with that statement.
I have first-hand experience with this one. I shared my experience on how I put like $200,000 in my retirement accounts just from paying off my $448.65 monthly car payment.
Cars are a financial suck for sure.
The average car payment in US is now $499. That is straight up stupid. That much invested would be over $5M at retirement.
The FT is basically doing the math that consumers need to do before making any major purchases like a new car. It was noted that, “The quality of the car park has gone up.” Meaning if you walk down many British streets you are more likely to see expensive cars.
That came straight from a report from the Federal Reserve Bank of New York stating Americans are unable to pay their bills.
Considering that the jobs report that recently came out stating job growth has surged by 266,000; it is missing key metrics in regards to whether or not families are staying above the poverty line.
If you are working multiple jobs and in line at the soup kitchen because you can not make ends meet, then something is seriously wrong.
For families that are employed, they have to get back and forth to work. Meaning a car is almost a necessity these days.
California Dreamin’ is better in a Mercedes-Benz than a Hyundai
The West Coast is infamous for its pricey luxury cars. Especially in places like California. Think Fast and the Furious.
Did you see Vin Diesel rolling around in a Prius?!!! Of course not.
Lift up the hood of any of those cars and you could find $100,000 worth of product.
As the F&F series progressed, the cars got more expensive not less!
Movies are prone to production inflation just as individuals are to lifestyle inflation.
For example, the 2014 Audi R8 featured in Furious 7 has a 4.2 coupe with manual transmission starts around $119,150 while the V10 model starts at $155,450, each including destination fees and a $3,000 gas-guzzler tax. Say what??!!!
And my favorite on the Fast & Furious list, the Lykan Hypersport, which was been unveiled at the 2013 Qatar Motor Show. W Motors will limit numbers of the car, which it heralds as “the first Arabian hypercar,” to just seven, each priced from US$3.4 million. What the heck will an oil change cost on this beast?!
Lycan Hypersport
Did the cast of The O.C. drive down to Tijuana (TJ as they called it) in a Kia? Absolutely not! Those young high rollers were riding around in high-quality luxury vehicles!
Places like San Diego and Silicon Valley do not have a mass public transit system the likes of the ones on the East Coast in New York or Washington DC metro. No sir. Those folks have to drive.
And if you have to drive everywhere from the In-And-Out Burger to CVS, then who wants to sit all day in traffic rolling around in a tiny Chevy Malibu.
You want the creature comforts you have at home on the road.
You are willing to buy all you can afford if you have to drive around every day in a car.
I understand why people are shelling out BIG BUCKS on the West Coast to drive Cadillac Escalade’s and BMW’s. Not only are they impressive driving machines, but comfortable too!
Luxury cars have a price beyond just the pricetag
Prestige vehicle sales are driving borrowers bankrupt. If you have to put $500, $600, $700 or even $900 into one household bill on top of a mortgage, then you can drive yourself right into the poorhouse quite literally!
Let’s do a little math. If you save $500.00 per month, your savings may grow to $2,797,302.30 after 40 years. This includes a starting balance of $0.00 and a 10% annual rate of return.
Starting amount
$0.00
Years
40 years.
Additional contributions
$500.00 per month
Rate of return
10% compounded annually
Total amount you will have contributed
$240,000.00
Total interest
$2,557,302.30
Total at end of investment
$2,797,302.30
That is a high price to pay just to have the BMW emblem on your steering wheel.
A lifetime of luxury car ownership and payments can leave your savings tank on $0.
Don’t do it.
With more American retirement savings on life support or at $0, you can make sure this doesn’t become your fate.
Forget buying expensive fast cars. I’d rather you drive a paid off Honda and get rich slow.
People paying it forward by becoming part of an organization as Denzel Washington and Steve McQueen did with their efforts with the Boys and Girls Club.
*Just FYI: The actor Steve McQueen grew up poor. The Boys and Girls Club gave him a clean and safe place to be in his youth. He paid it forward after he become a famous actor by asking movie studios to give him thousands of white t-shirts, socks, and personal hygiene products as part of his compensation package for starring in their films. He secretly turned around and donated all this material to the Boys and Girls Club to give out to the young men there. Just melts your heart doesn’t it.
Steve McQueen also known as “The King of Cool”
How the Teenage Mutant Ninja Turtles always looked out for the little guy.
TMNT film circa 1990
The friendship between Shaggy and Scooby-Doo. Those two they just warm my heart.
Some of my favorite singers that have turned their talent into success are Whitney Houston, Pat Benatar and Toni Braxton.
One of the things I remember Ms. Braxton saying, “music is not about you just saying what you think, but how you make people feel.” Her music and voice have always made me feel good.
Seeing her up on that stage performing recently at the American Music Awards, reminded me of all the reasons I liked her; she has a gift for making you feel good with the words she sings that transcends whatever hard times you are going through in that moment. She makes you feel happy.
Toni Braxton performs onstage during the 2019 American Music Awards at Microsoft Theater on November 24, 2019, in Los Angeles, California. (Kevin Winter/Getty Images for dcp)
And speaking of people that inspire you with their words, I would like to introduce you today to someone who has not only done that for me, but for millions of people around the world through his writing on personal finance. The one and only Mr. JD Roth.
GBM is the place where we like to get down and dirty into the math behind building wealth, but we keep the jokes clean. Our jokes here are like a Hallmark card, GBM cares enough to send the very best! Even my tweets are called Lipstick Confessions!!! haha 💋Smooches
Below is just a taste of what GBM has to offer. This blog ages like fine wine; it only gets better with time. No topic is off limits!!! Not even French Fries!!
All the reasons I want you to pursue financial indepence.
1. Freedom 2-100 see number one
That is the answer always, in the illustrious words of #buzzlightyear To infinity and beyond. 😂
I’m like Space Ghost Coast to Coast. Booking celebrity guests for my audiences reading and fiscally literate pleasure.
Fun Fact: The original pilot of Space Ghost C2C was produced in a closet, and the guest was Denzel Washington (second mention in this post cause Denzel is just everywhere). It was green-lit as a series on the Cartoon Network in 1994 and went on to huge success.
Therefore, if you are looking to start a podcast, let this be inspiration to know it is okay to start it on a shoestring budget and in your closet.
Let’s get down to the interview.
Topic du jour: The tortoise wins the get rich race every time. Who is the man behind the tortoise shell?
Subject: Men who talk money. How to Get Rich Slow?
GRS JD Roth: YES, I would be happy to do your interview.
Ladies and Gentlemen, please put your hands together for Mister JD Roth!!! The founder of Get Rich Slowly.
ALLOW ME TO INTRODUCE MYSELF
GBM Miriam: It was great meeting JD Roth of Get Rich Slowly at FinCon 18 in Orlando. I had seen his picture on the blog-sphere so many times that I knew who he was on sight. I tried to keep a calm and cool composure, but on the inside I was screaming, “IT’S JD ROTH!!!!!” Over and over in my head.
Imagine my surprise when I got to ride shotgun with him on our way to a restaurant for a fellow bloggers birthday.
You can check out more of this story on my post about my very first FinCon called FinCon The Recap from your Friendly Neighborhood Greenbacks MagnetPart I and Part II.
We are in the car with Liz of Chief Mom Officer, Military Dollar, and Erin of Reaching for FI. In a car full of women, he was totally cool driving while listening to Taylor Swift. Yes, I found out that JD is a T. Swift fan. I am too. It’s like john jacob jingleheimer schmidt up in here!!!
Here is proof here!! I just so happen to think Taylor Swift is pretty awesome too! 😉 Great minds think alike. I literally just posted tweets on Taylor Swift and Lizzo last week. 😂👍
Just sent @BitchesGetRich a 2000-word email (yes, for real) on why I love both @Lizzo and @taylorswift13. Not much personal finance in it, I'm afraid, but a lot of personal conviction. Because these two women are awesome!
My dream concert is a Lizzo/Taylor Swift collaboration.
I figured out how to control my spending. If I carry the world's tiniest purse, like #LizzoAtAMAs, I could save a fortune. There's no way I could carry a wallet or credit cards in that 🤣 #TuesdayThoughtspic.twitter.com/ReXIL7u9kA
This is how I felt getting to interview JD. Over the moon and on top of the world. After three years of blogging, I made it. I’m still here. Anything is possible if you work hard enough for it. 😉So Grateful.
JD STARTS A BLOG ABOUT GETTING RICH
1. What prompted you to start a blog about money? How much makes you feel rich?Would you say $500k, $1M, $2M, or more?
I started Get Rich Slowly for three reasons. First, I wanted to document my own journey out of debt. Second, I thought maybe I could help other people learn to manage money as I improved my own financial skills. Finally, I hoped maybe I could make a few hundred bucks per month to supplement my income.
I had NO idea that starting Get Rich Slowly would change the trajectory of my life, financial and otherwise. It wasn’t even something I could have conceived at the time. Yet it changed everything.
How much makes me feel rich? That’s a great question. It doesn’t take much. I grew up poor. My family lived in a run-down trailer house in rural Oregon. My father was often out of work. Sometimes we had to take assistance from our church in order to get by. Today, I have far more money than my parents ever did. I feel very rich. But I don’t know what dollar amount leads to that…
GBM Miriam: Well ok. Thank you for your honesty. It is always appreciated. I fell into learning about money by accident. I was at my boyfriend’s place when I saw a Kiplinger magazine lying around. I just so happened to pick it up…
2. Any favorite finance books? How come?
I’ve read and enjoyed many finance books, but my favorite books about money usually aren’t actually books about money. What I mean is that often the books that I believe will most help people with their finances aren’t financial books. They’re only tangentially related to finances.
For instance, I think The Seven Habits of Highly Successful People is probably one of the most helpful book anyone can read if they’re struggling to improve their finances. The ideas and philosophy it conveys are so valuable in developing a successful financial mindset.
GBM Miriam: One of my top favorites is The Millionaire Next Door. That and the one you named are some good reading. 👍
3. What are you reading right now? What’s on your night stand?
Haha. I always have several books going at once. Right now, I’m reading:
* Wake Up and Live! by Dorothea Brande
* House of Suns by Alistair Reynolds
* Y: The Last Man by Brian K. Vaughan
* Deep Work by Cal Newport
This “many books at once” habit kind of goes against the whole Deep Work philosophy…
4. One thing people may not know about you?
When I left for college in 1987, I thought I was going to be a religion major. My aim was to get a religion degree, then become a Christian missionary. I thought I’d ultimately end up as a church pastor.
GBM Miriam: I did see you mention something about that on your blog. I put a link to that story in your response for readers to be transported there faster than Marty hitting 88 mph by clicking on college in 1987.
5. What’s in your wallet? How did you start building wealth?
It contains my debit card, my business credit card, my personal credit card, my Apple card, maybe $40 cash, and my insurance info (health and vehicle). That’s it.
I started building wealth through a two-pronged attack. First, I reduced how much I was spending. Second, I worked to build my income. Basically, I did my best to work both sides of the wealth equation (income and spending) in an attempt to grow my saving rate as high as possible.
Well said. So that’s what I did. Unlike that episode of King Meets Queens, when Carrie buys thousands of dollars worth of expensive clothes, keeps the tags on them to return them for a refund (get this because she could afford them *ahem* $2,000 Chanel suits) and said this to her husband…
If this sounds like you, please stop reading THIS and go read the Get Rich Slowly archives right now! If you want to get rich, cut the excuses and get fiscally educated!!!
If you are truly fiscally clumsy, then try the lazy method of investing. I would use Swensen’s model that he crafted for Yale University. With over $27 billion dollars under management, the Yale endowment is the second largest college endowment in the world (Harvard is #1). Just watch the video. Now you and Rory Gilmore will have something in common.
And if this is too much, just park your investments into a total stock market fund like the Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) or Vanguard Total Stock Market ETF (VTI).
BONUS ROUND
Bonus Questions (pick any of the questions from the top or below that you want to answer)
6. Any life or money lessons from a favorite movie or TV show you would like to share?
I’m partial to Mr. Roger’s philosophy of loving others and encouraging others to love. He believed in accepting people for who they were, regardless of who they were. I subscribe to that ideal too.
GBM Miriam: Good stuff. I ❤ Mr. Rogers I wanted to take a ride on that train soooo bad! It looked like so much fun.
7. If you found a lottery ticket that ends up winning $1.5 million. What would you do?
I would buy new cars for me and my girlfriend. I’d get her a Tesla Model 3. I’d buy myself a Mini Cooper — the electric model, if it ever gets released. I’d stick the rest of the money in the bank.
GBM Miriam: A mini Cooper eh? I can dig it.
But that Tesla looks sexy.
And love those falcon wing doors.
Car Magazine UK Tesla photo
8. Who is your favorite X-men, Justice League, Avengers or comic book character? Why?
I’ve always been partial to nerds from the Marvel universe, characters like Cyclops from the X-Men or Mr. Fantastic from the Fantastic Four.
GBM Miriam: You are probably wondering why I asked this question. Beside being a huge cartoon and Mavel fan, I actually named this blog after a Marvel comic book character; Magneto. 😉
Just FYI: We skipped a few numbers and moved on to question 11.
11. If both a taxi and a limo were priced the exact same, which one would you choose?
Neither. I would probably walk, if I could.
GBM Miriam: Yeah, that’s me. I love to walk. I’m like Elizabeth Bennett in Jane Austen’s Pride and Prejudice.
12. What song or songs best describes your work ethic?
“Don’t Worry, Be Happy” 🙂
13. What would you do if you just inherited a pizzeria from your uncle?
I would sell it, if it were profitable. Hell, I’d sell it even if it weren’t profitable. That sounds like too much work!
GBM Miriam: You may be right. I know it’s just a cartoon but they worked the crap out of Doyle in that pizza place in Galaxy High!! 🤣
14. What was your best MacGyver moment?
This question is so NOT me. I’m not a MacGyver type. That said, my best MacGyver moment was probably installing a new tape deck in the 1993 Toyota pickup I bought last January. Admittedly, I had instructions for this project, but it was still pretty MacGyver-y for me. Now I can listen to cassette tapes as my dog and I cruise around Portland. 😉
15. If I gave you $40,000 to start a business, what would you start?
I know the answer to this! I’d start a blog. In fact, I’ve spent a similar amount to launch blogs in the past — and they’ve become businesses.
GBM Miriam: Why am I not surprised. 😆 I love blogging too.
How I feel about blogging: “Tonight, darling, we are going to right a lot of wrongs. And we are going to wrong some rights. The first shall be last; the last shall be first; the meek shall do some earth-inheriting.” -Margo Roth Spiegelman, Paper Towns by John Green
Cara Delevingne as Margo Roth Spiegelman in Paper Towns
New at the GRS blog: A look at how who we are (and who we want to be) shapes our financial lives: https://t.co/1efsBn9clQ — This is my first longer piece since deciding to NOT publish so often. It was fun to write.
16. If you had $2,000, how would you double it in 24 hours?
Hm. I’m not sure. There’s no reliable way to do this, of course. My inclination would be to pick a game of pure chance, such as roulette, then to make a single bet that would either double the money or lose it in one go. Using that roulette example, if I bet all $2000 on, say, even numbers or odd numbers, I’d have about a 48% chance of doubling my money and a 52% chance of losing it all.
Really, though, there’s no sure way to do this.
GBM Miriam: That’s JD. He always gives it t you straight and keeps it 💯just how we like it.
For example, he just put this out there for our fiscal viewing. Check out his post on Our first annual family meeting. Bringing people and finances together. As a financial blogger, that just melts my heart ❤right there.
THE END
GBM Miriam: Thank you JD!!! It was an absolute dream come true and a pleasure to have you stop by Greenbacks Magnet.
It was my honor to be your host this evening. See you at FinCon 2020. The year of perfect vision!!! Until we meet again!!! I bid you farewell.
Want more fiscal nuggets of wisdom, from the JD Roth?
You ever drive by a neighborhood that ends in Estates or Hills and look in the driveway?
There are usually enough European cars around for these folks to start a dealership down the street and give Audi a run for their money.
You figure places like Beverly Hills, Miami Beach, and New York are places that can afford these types of cars, but what about places you would think those people may not make the type of money it requires to have those vehicles?
Unfortunately, in my few decades on this earth, I have seen things that you would not believe.
Since, many of you out there know my absolute fiscal pet peeve is new car ownership, you understand my ire as I write this.
I can teach you to get rich without having to sign a car loan document or sell your soul. I’m not Ursula. I will give you back your voice.
I rejected that notion that I must own a luxury car to feel good about myself and feel important. I paid off over $50,000 worth of debt so I could start investing more money in Mr. Market.
The goal was to try to always be increasing my investment portfolio by $20,000-$25,000 or more per year. It took me a decade, but I hit that goal. It’s raining dividends right now. All from just rejecting new car ownership.
I am going to share with you a few car buying horror stories that may very well give you nightmares. So hide the wife. Hide the kids. This is the part in the movie theater where you turn your heads, close you eyes and take a deep breath.
I am about to lift up the hood on the numbers behind what buying new cars will be in opportunity costs in this series of posts on rejecting new car ownership. So buckle up, sit back, and enjoy the ride.
Drip so hard or broke so much
First let me explain what drip is.
It is a slang term many rappers use and there are more or less elaborate definitions of “drip.” Offset and Cardi B use the term to refer to their diamonds and wealth, while Atlanta rapper Gunna told Billboard that “drip” refers to fashion: Drip is your attire, the clothes you wear.
For instance, he doesn’t own like 50 Rolex watches or chains, but only rotated the same like three on Instagram because on the world of gram it’s all about appearances.
He also has stated he had $8 million in Bitcoin, but really he owns $0. He just made up $8 million out of thin air! Why put on this show? For likes of course, what else?
This is nothing new. People inflate their salaries, income, accomplishments, and credentials all the time. What makes this case so sad is that he is telling the world, not just a few friends having a round of drinks while playing a poker game down at the local watering hole.
I have noticed that once you actually stop looking and start listening to what people have to say about their finances, that is when you uncover the truth. Behind all the expensive cars, clothes, and homes most people are stressed and broke.
What is wealth
I gave my definition of wealth in a previous post. Really it means you can meet all your basic needs and have some left over to last you several decades without you sweating whether or not the bills get paid.
For regular folks, a good week looks like this – there’s milk in the fridge, none of the kids got into a car accident or ran over any mailboxes this week, and all the bills got paid on time.
For the wealthy, a good week looks like this – enough food in the cupboards to feed an army, you taking the Rolls to work this week cause the Jag is in the shop being detailed, and you earned more in dividends than you spent last month.
Wealth is every bit as good as it sounds. Let us see the other side of the coin and how the lack of having enough coins can cause despair.
Dream cars are only for those with money in the bank
Here is where the horror stories are about to begin folks.
Brace yourselves.
I knew a guy who loved his dream car so much that it was keeping his bank account in the red. Let’s call him Edgar. Edgar grew up without a father. At one point, he was living in a shelter. After years of toiling in the salt mines, he was able to get an apartment and get on better financial footing.
At the ripe old age of 28, he decided to “treat himself” because he “deserved it” to a $30,000 BMW convertible and eventually he got a girlfriend to ride in that car beside him.
He felt that he had paid his dues so he should have a nice car.
I don’t know about all of you out there, but I look at paid dues as 10, 20, 30, or 40 years of busting your hump to build a security and a solid foundation for your future self and family. Buying a luxury car that costs $500 a month is not the way to having a life of abundance.
How else could he have spent that money?
Let’s say he saved up the $30,000 ($6,000 a year over five years) by taking public transportation to work and invested that money instead of trying t impress people with his wealth…er uh I mean debt that is masquerading as wealth in the form of a nice financed luxury vehicle. He could have also saved up a few tax returns and got a beater to get back and forth to work.
If you save $100.00 per month your savings may grow to $731,411.74 after 30 years. This includes a starting balance of $30,000.00 and a 10% annual rate of return.
Starting amount
$30,000.00
Years
30 years.
Additional contributions
$100.00 per month
Rate of return
10% compounded annually
Total amount you will have contributed
$66,000.00
Total interest
$665,411.74
Total at end of investment
$731,411.74
Year
Additions
Interest
Balance
Start
$30,000.00
$30,000.00
1
$1,200.00
$3,064.06
$34,264.06
2
$1,200.00
$3,490.46
$38,954.52
3
$1,200.00
$3,959.52
$44,114.04
4
$1,200.00
$4,475.46
$49,789.50
5
$1,200.00
$5,043.01
$56,032.51
6
$1,200.00
$5,667.32
$62,899.83
7
$1,200.00
$6,354.01
$70,453.84
8
$1,200.00
$7,109.45
$78,763.29
9
$1,200.00
$7,940.38
$87,903.67
10
$1,200.00
$8,854.41
$97,958.08
11
$1,200.00
$9,859.87
$109,017.95
12
$1,200.00
$10,965.86
$121,183.81
13
$1,200.00
$12,182.43
$134,566.24
14
$1,200.00
$13,520.67
$149,286.91
15
$1,200.00
$14,992.74
$165,479.65
16
$1,200.00
$16,612.02
$183,291.67
17
$1,200.00
$18,393.24
$202,884.91
18
$1,200.00
$20,352.54
$224,437.45
19
$1,200.00
$22,507.80
$248,145.25
20
$1,200.00
$24,878.59
$274,223.84
21
$1,200.00
$27,486.45
$302,910.29
22
$1,200.00
$30,355.08
$334,465.37
23
$1,200.00
$33,510.59
$369,175.96
24
$1,200.00
$36,981.65
$407,357.61
25
$1,200.00
$40,799.79
$449,357.40
26
$1,200.00
$44,999.79
$495,557.19
27
$1,200.00
$49,619.76
$546,376.95
28
$1,200.00
$54,701.76
$602,278.71
29
$1,200.00
$60,291.92
$663,770.63
30
$1,200.00
$66,441.11
$731,411.74
Back to Edgar’s story.
One night while going to see his soon-to-be ex-girlfriend, he was so tired (he would get tired doing like two sit-ups) that he fell asleep at the wheel. He got into a major accident, the car was in the repair shop for months, BMW lent him a loaner, him and the girlfriend broke up (she may have been with him for the car) and he got to drive that DREAM car for all of like 8 months!
He did eventually get it back, but I noticed that every couple of months or so the car would have an issue and need to go in the shop.
He bragged how he was so smart to get an extended warranty or the repair bills would be like $2,000 or more. However, what he is failing to realize is that when that warranty runs out, you will be the one paying those expensive repair bills because luxury comes at a price. A very expensive one.
Last time I laid eyes on him; he still had that car, was still single, and had moved into a more expensive apartment. Instead of investing money, he spent every dime and his bank account stayed on empty.
If he would have been willing to give up the car, he could have saved a small fortune. I tried to run the numbers with him, but he wasn’t really interested. Little did he know that his dream car was turning his life into a nightmare.
After he lost his job, he couldn’t afford to make the payments. His mother had to step in and help him. Maybe if he put the money he spent on those expensive Xbox video games in the bank instead, he might have had the money to pay his bills himself. He needs to keep that devil-may-care attitude in the video games where it belongs.
Dante in Devil May Cry for Xbox
And his motto was “live for the day.”
If living for the day means being broke for a lifetime, I’ll pass. He may have had a great car that made him feel like he had arrived and look like he had money, but he was really BROKE.
Do cars really equal freedom or are they a debtor’s prison on four wheels
I have owned only two cars in my entire life.
They are expensive money-pits with all-wheel drive.
I have seen people spend so much money on car repairs that it makes me want to cry. I have also seen people own three, five, or even seven cars by the age of 25!
Many people never even go on to pay the car off. They just roll over negative equity onto the latest new car purchase. Putting them in a never ending spiral of debt payments.
And do not even think about not purchasing gap insurance.
Gap insurance is an optional, add-on car insurance coverage that can help certain drivers cover the “gap” between the amount they owe on their car and the car’s actual cash value (ACV) in the event of an accident.
Even this can be something only the well-heeled can afford.
Gap can cost hundreds or thousands of dollars additional on top of what you are paying to purchase your vehicle. It must be paid for up front at the time of vehicle purchase. If you cannot pay out of pocket, they will add it to your loan. You are now paying interest on this insurance coverage.
Why do you need gap? I have a friend. Let’s call her Pam. Pam likes nice cars. However, Pam is in-between jobs right now, is several months behind on mortgage payments, and has been in two car accidents in two years.
At one time, she owed an Audi. When a maintenance issue arrived and the repair bill came in at $3,000, she couldn’t afford it so she sold it.
Speaking of repair bills, I have heard stories of people leaving the Jiffy Lube or car dealership after getting the repair quote, which they cannot afford, then go on to say, “I know someone that will do it for cheaper” or “I’ll fix it later” or “I’ll take it to my mechanic.” All just mean the same thing: Broke.
When you cannot pay the repair bills on your car, then how can you possibly afford to save for retirement?
Getting back to Pam, she ended up with gap insurance from a third party. Therefore, she was going back and forth trying to get the money for the car for over four months!
I don’t know many folks that can go without a car for this long. Her quality of life immediately went down. You could feel it with every passing month when you were around her.
One word. I will give you one guess. You give up? It rhymes with repair. Of course I mean despair.
She also has no cash savings and no retirement.
She was very young at the time. Maybe 22. This is what she could have done if she saved up that money and invested it instead.
If you save $100.00 per month your savings may grow to $1,464,646.73 after 40 years. This includes a starting balance of $20,000.00 and a 10% annual rate of return.
Starting amount
$20,000.00
Years
40 years.
Additional contributions
$100.00 per month
Rate of return
10% compounded annually
Total amount you will have contributed
$68,000.00
Total interest
$1,396,646.73
Total at end of investment
$1,464,646.73
Year
Additions
Interest
Balance
Start
$20,000.00
$20,000.00
1
$1,200.00
$2,064.06
$23,264.06
2
$1,200.00
$2,390.46
$26,854.52
3
$1,200.00
$2,749.50
$30,804.02
4
$1,200.00
$3,144.46
$35,148.48
5
$1,200.00
$3,578.92
$39,927.40
6
$1,200.00
$4,056.80
$45,184.20
7
$1,200.00
$4,582.47
$50,966.67
8
$1,200.00
$5,160.72
$57,327.39
9
$1,200.00
$5,796.80
$64,324.19
10
$1,200.00
$6,496.47
$72,020.66
11
$1,200.00
$7,266.12
$80,486.78
12
$1,200.00
$8,112.74
$89,799.52
13
$1,200.00
$9,044.00
$100,043.52
14
$1,200.00
$10,068.42
$111,311.94
15
$1,200.00
$11,195.25
$123,707.19
16
$1,200.00
$12,434.76
$137,341.95
17
$1,200.00
$13,798.25
$152,340.20
18
$1,200.00
$15,298.06
$168,838.26
19
$1,200.00
$16,947.87
$186,986.13
20
$1,200.00
$18,762.67
$206,948.80
21
$1,200.00
$20,758.93
$228,907.73
22
$1,200.00
$22,954.83
$253,062.56
23
$1,200.00
$25,370.31
$279,632.87
24
$1,200.00
$28,027.34
$308,860.21
25
$1,200.00
$30,950.07
$341,010.28
26
$1,200.00
$34,165.09
$376,375.37
27
$1,200.00
$37,701.60
$415,276.97
28
$1,200.00
$41,591.74
$458,068.71
29
$1,200.00
$45,870.92
$505,139.63
30
$1,200.00
$50,578.02
$556,917.65
31
$1,200.00
$55,755.83
$613,873.48
32
$1,200.00
$61,451.41
$676,524.89
33
$1,200.00
$67,716.54
$745,441.43
34
$1,200.00
$74,608.19
$821,249.62
35
$1,200.00
$82,189.02
$904,638.64
36
$1,200.00
$90,527.91
$996,366.55
37
$1,200.00
$99,700.71
$1,097,267.26
38
$1,200.00
$109,790.79
$1,208,258.05
39
$1,200.00
$120,889.85
$1,330,347.90
40
$1,200.00
$133,098.83
$1,464,646.73
I have actually seen people own multiple cars even though they can only drive one at a time. However, you have to maintain and insure all of them. Just give up the ones you are not using and fund your retirement with that money.
Instead of that money going into a 401k, the lender and insurance company was getting rich off these never ending payments they receive. Put that money to work for yourself by investing it.
Tow truck companies are winning
Have you ever seen that show on A&E called Parking Wars? Some of the saddest things I have ever seen to do with cars was on that show.
The struggle is real in the city of brotherly love. So many people in Philadelphia were getting their cars towed and booted for failure to pay parking tickets it was crazy.
Those meter maids were making like $20,000-$30,000 a year and they were on a mission! Giving out those tickets like gumdrops! And making revenue for the city in the process.
I have seen and heard some stories so heartbreaking it made my eyes start watering. I have seen or heard people lose their jobs, then their homes, and finally get their car repossessed with all their belongings in it.
One guy came out running to his car while they were lifting it on the tow truck. He had almost every valuable possession he owed in that car including the photo albums of his deceased family members.
All he asked is if he could go in the trunk and get his stuff (clothing, personal hygiene, photos, credentials). The tow driver said no.
Unfortunately, once the car is on the lift, it can’t be stopped unless you pay or have already paid and can PROVE IT!
And that guy went from being homeless and living in his car, to being homeless on the street.
I have seen people give up their cars due to debt, gambling, substance abuse, you name it.
I know someone who saved up $8,000 and sink every penny into a new car just to have a $100 lower monthly payment. Never mind that she was still living with her parents at the age of 42.
I have also seen people have to choose between paying the gas, electric, or phone bill on-time or pay the car note.
I even had an ex-coworker get her car repossessed twice! She just had to have an SUV. She was making like $12 bucks an hour at time and was only 20. She destroyed her credit and the possibility of home ownership for at least a few years just for the sake of looking rich instead of actually saving towards becoming rich.
She was broke. She had no wealth whatsoever! The little she had, she mailed in monthly installments to Chevrolet.
Society would like you to believe that owning a nice brand new luxury car will make you look like you have achieved success.
It really only means someone has allowed you to borrow money from them and pay them back with interest for the privilege of loaning you their money.
Real wealth cannot just been seen by the naked eye in the form of fancy condos, clothes, jewelry, furs and luxury cars. It is usually shielded from prying eyes in the form of investments and inside bank accounts.
For most folks, a luxury car does not mean you have wealth; it means you have debt. Reject new cars like I have and I promise you will actually start to build wealth.
The other day I overheard people talking about being 90 days late and past due…blah blah blah I couldn’t make out the rest, but I heard enough to fill in the blanks. Debt, debt, and more debt.
Two of the biggest culprits are house and car loans. Some may disagree with me, but cars are wealth killers! At least Dave Ramsey agrees with me.
Then it hit me.
After three years of blogging, I found my niche.
This blog is really all about rejecting new car ownership to become financially independent (FI). That’s right. I refuse to buy new cars so I can become FI.
When I hear people complain about having no money but paying $600 a month for their car, all I hear is the same sound Charlie Brown’s teacher makes. Cut the excuses!!!
Obviously, reminding people why they should reject buying a NEW CAR bears repeating.
However, you and I both know that those are small potatoes compared to what some folks are shelling out. We gotta Keep Up With The Joneses’ today or life just plain sucks!
There are now new luxury vehicles coming off the assembly line with an MSRP of $80k! MSRP stands for the Manufacturer Suggested Retail Price — also known as “sticker” price — which is a recommended selling price that automakers give a new car. A dealer uses the MSRP as a price to sell each vehicle; it’s different from invoice price on a car, which can stand thousands below the sale price.
Vehicles have become so expensive that dealerships are offering 84 month car loans! I have no intention of owing the man that type of moola.
Especially, considering that the REPO Man is out there lurking in the shadows, ready to take my car if I miss even one single car payment.
And BTW the REPO Man tends to show up at the worst possible times; such as when you are already 20 minutes late picking up your kids from soccer practice, while the Walgreen’s pharmacy is texting you that this is the last day to pick up your $600 EpiPen or else it goes back on the market.
I actually have a friend that was unable to continue making payments on her BMW. Before, we get into this story here is a little background. She owns a home with an ARM and payments can fluctuate wildly from $1500 to $2400, is finishing her bankruptcy payments, and calls herself a Glam Ma and not Grand Ma.
She used to use dating apps after her divorce, but stopped after one guy told her he was looking for a place to stay. Hard pass. No more Bumble Bee for her! She likes her independence. Always has, always will.
For instance, her son recently asked if his mother would be willing to watch his newborn infant after she is born to save on daycare costs, which is astronomical in America and can cost people one whole paycheck, to which she replied, “not unless she got ID to sit with me at the bar on Friday’s, then no I can’t watch her.”
Getting back to the car situation, she decided to stop all car payments due to financial constraints.
Therefore, she stopped paying for two years.
Two whole years!!!
Since she knew she could no longer afford it; she just strategically stopped paying and put that money towards other obligations. The same way a squatter strategically walks away from an underwater mortgage. No reason to raid the retirement accounts and then end up completely broke now is there.
Anyhoo, she kept the car clean and left nothing in it in case the repo man ever showed up to take it. Well that day finally came and they took it right out of her driveway.
She then decided to hail cabs, and take Lyft and Uber rides until she got her tax refund and then she bought her next car with cold, hard cash baby! Lesson learned. If you own it, no one can take it.
Setting money on fire
Cars are making people go broke. SUV’s are some of the priciest on the market.
According to Business Insider, Ford made a game-changing decision in April when the company announced it would dissolve its entire line of sedans and compact cars that includes Focus, Fusion, Fiesta, and Taurus by 2020. Other cars that will be discontinued this year and beyond include the Alfa Romeo 4C Coupe, Chevrolet Sonic, and Cadillac ATS.
Maybe this is why Aston Martin has rolled out its latest car with a pricetag of this: New $189,000 SUV.
You could wind up spending $2500 a month just to own this luxury monster!
Let’s do a little math
I’m going to pull back the curtain on this and show you why you need to take off your BMW rose-colored glasses.
Buying a 2020 BMW truck will cost you about $176,000 after all is said and done.
Item
2020 BMW X6 SAV M50I AWD
Interest:
Maintenance:
Gas:
Total Cost over 7 years:
Cost
$104,095
$104,095 x 3% = 31,228 BMW of Alexandria website
$3,122.85 x 7 = $21,859.95 Setting aside 3% of purchase price
$50 x 52 = $2,704 x 7 = $18,928
$176,110.95
You get to basically drive to work, the grocery store, gym, and Pottery Barn for the low, low price of almost the cost of a house in Georgia.
20 Marietta St NW Unit 6B Atlanta, GA 30303
$179,000 Price 2 Beds 2Baths 1,156 Sq. Ft.$155 / Sq. Ft. Redfin Estimate: $175,558 On Redfin: 70 days Status: Active
Redfin Listing
That is also more than three times the median salary of an American adult making $56,000. Even Rappers are buying into this crap before the ink is even dry on that million-dollar deal they just signed!
That video came out the same year I bought my car.
Maybe if I had seen this, I would have done something different.
Hopefully seeing this here will help all of you out there.
Put that money into Mr. Market
I know this is the part where your eyes glaze over but please bear with me.
Here’s my story. In 2003, I decided I needed a new car. BIG MISTAKE! I previously had an Nissan Altima that cost about $8k and I was paying $229 per month for it. Then it started having problems so I decided to trade it in for a new Ford Explorer.
Original MSRP was $30k, but I got it on sale for $24,000. Stupid. I had a negative equity balance on the Altima so I rolled it over onto the new loan. I went from owing $6k to $32k in the span of 5 hours at a car dealership from the time I walked in until I signed the papers.
The payment on the Explorer was $448.65 a month for about 5-6 years. Therefore, from 2003-2009 I was paying on this car instead of investing that money in Mr. Market. DUMB!!!! For 6 whole years, I could not do much of anything because the car payment was always due.
Want to go on that trip to Dominican Republic? Sorry guys, can’t do it. The gas guzzler has got to get paid.
Want to buy new socks and clothes because yours are worn out and have holes in them? Sorry, no can do. The car note is due on the first, which is same time as the rent. Sucker! They got me good.
I was even paying over the phone for faster processing at the tune of $5 a pop!
All that changed once I paid it off. I got down to $1500 and just paid it off. I was free b#tche$!! Can’t nobody hold me down…oh no…I got to keep on moving!!!
I haven’t had a car payment in over 10 years! Not since Steph Curry was selected as a draft pick in the NBA.
I took that money and started investing in stocks. Before I know it, I had like a couple hundred grand in Mr. Market just from rejecting new car ownership.
How would you feel having $200,000 working for you everyday 365/24/7 in the market paying you just for having a pulse?
The birds were chirping. Car horns are honking. The sun is shining.
Nothing extraordinary.
Then I decide to look at one of my retirement accounts, when lo and behold, I saw $466 in capital gains I earned the end of December last year. This was a surprise because I wasn’t expecting to earn much on the account as I was in the early stages of still building this one up.
Looking at some other accounts, I learned I gained over $25k! Not too shabby.
Let me illustrate how investing can turn you into a millionaire.
A millionaire is built by attracting $1 dollar at a time
If you save $24,000.00 per year your savings may grow to $1,070,380.15 after 17 years. This includes a starting balance of $0.00 and a 10% annual rate of return.
Starting amount
$0.00
Years
17 years.
Additional contributions
$24,000.00 per year
Rate of return
10% compounded annually
Total amount you will have contributed
$408,000.00
Total interest
$662,380.15
Total at end of investment
$1,070,380.15
Therefore, if you start with nothing and decide to max out your 401k for 17 years, you are now part of the double comma club! You can see the numbers below.
Year
Additions
Interest
Balance
Start
$0.00
$0.00
1
$24,000.00
$2,400.00
$26,400.00
2
$24,000.00
$5,040.00
$55,440.00
3
$24,000.00
$7,944.00
$87,384.00
4
$24,000.00
$11,138.40
$122,522.40
5
$24,000.00
$14,652.24
$161,174.64
6
$24,000.00
$18,517.46
$203,692.10
7
$24,000.00
$22,769.21
$250,461.31
8
$24,000.00
$27,446.13
$301,907.44
9
$24,000.00
$32,590.74
$358,498.18
10
$24,000.00
$38,249.82
$420,748.00
11
$24,000.00
$44,474.80
$489,222.80
12
$24,000.00
$51,322.28
$564,545.08
13
$24,000.00
$58,854.51
$647,399.59
14
$24,000.00
$67,139.96
$738,539.55
15
$24,000.00
$76,253.96
$838,793.51
16
$24,000.00
$86,279.35
$949,072.86
17
$24,000.00
$97,307.29
$1,070,380.15
Grow your net worth with Real estate and REIT’s
During the Great Recession, the subprime housing market destroyed property values all over the country.
Since most Americans net worth is tied to their homes, around 50% or more, this caused many people to delay retirement because their homes were now worth less than the mortgage owed on them.
Warren Buffet even said that homes were selling for so cheap in some markets that if he had the time and resources to manage them, he would buy hundreds of thousands of homes to collect the rent on them.
Might I suggest an alternative to active real estate investor, passive real estate investing with REIT’s; a real estate investment trust (“REIT”) is a company that owns, operates or finances income-producing real estate.
Approximately 87 million Americans invest in REIT stocks through their 401(k) and other investment funds. REITs must pay out at least 90 % of their taxable income to shareholders—and most pay out 100 %. In turn, shareholders pay the income taxes on those dividends.
mREITs (or mortgage REITs) don’t own real estate directly, instead they finance real estate and earn income from the interest on these investments.
The reason I love Park Place so much
I know that everyone wants Boardwalk with a hotel because it makes you the most money in the game, but Park Place is the first stop on the tour.
You have to pass that to get to Boardwalk.
However, there are times when you roll the dice and land on Park Place and then hit a two and land on Boardwalk! Cha ching!
Park Place sets up the psychological warfare that I never could.
You land on my property and have to pay me $1500 for Park Place and $2000 for Boardwalk. That is $3500 bucks!
You now see the reason why people own real estate. You can make some serious cash collecting rent and it seems to come around on the first of every month over and over and over again.
Once you put in the work to own the property and maintain it, it starts to spit off cash flow and feeds you.
If you look on the Monopoly Park Place deed, you will notice in the beginning you only collect $35 in rent with no houses or hotels. As you start owning more properties, you start collecting more in rent.
If you cannot stomach the thought of waking up at 3 am to a phone cal about a clogged sink or toilet, then you can hire a property manager or just stay passive and invest in REITs instead.
Why you should invest
It’s simple. You should invest because it can make you rich.
Consistent investing has proven to turn people into millionaires over time. You could do the following:
Collect teeny tiny amounts of interest from your checking account with your local bank
Put your money under a mattress where it earns $0
Invest in Mr. Market and let compound interest do its thing
