I want to take you down the rabbit hole that is my train of thought lately. You know those movies where there’s a mad scientist who is brillant, but with wild hair, a little crazy, and socially ignorant? Sometimes I feel I am turning into that person (may be not quite brilliant but at the very least insightful).
I’ve been watching more Netflix lately, and the show I’ve centered on is How to Get Rich hosted by Ramit Sethi. I think that title is misleading, but titles have to be attractive so people click on them. Sethi is a “personal finance advisor” who basically teaches people how to live their “Rich Life”: basically meaning how to prioritize their spending in order to afford what that person considers the most enjoyable items and experiences. In reality, the show demonstrates that achieving your financial goals is pretty easy once you convince yourself you can’t have everything. One of my favorite quotes about money is, “you can afford anything, but you can’t afford everything.” By cutting out extraneous spending and aggressively paying down debt, Sethi shows that self control—not that act of making money itself—is actually the hardest part of becoming financially stable for many Americans. That being said, there are many people in much more dire financial conditions where Sethi’s advice is not so simple, but I want to address an audience here that has relatively decent earning potential (I’d define this as $70,000+ per household).
I want to focus on that extraneous spending part, because I’ve been thinking very deeply on this point for around the last month. A TikTok featuring an interview with Anton Kreil, a former Goldman Sachs trader, has intensified some thinking I have around America’s view of a successful life.
Kreil explains how mortgages are liabilities for homeowners and assets for banks. Mortgages lock you in with little flexibility anywhere from 15 to 30 years. You are making payments, funding the rich people working for or owning shares of the bank that receives your monthly payments. Meanwhile, you are also on the hook for maintenance, paying thousands for a new roof, water heater, or whatever repair comes next. You are eating away at your earnings. In addition, the interest you pay on your mortgage will most likely amount to 2-3 times cost of the original mortgage loan. When you take out a mortgage for $383,061 at 6.27% (which is about where rates are now on the low end) for thirty years, your total cost for the life of the loan is $850,880.68.1 So over thirty years, you ended up paying more than 2.5 times what you borrowed while also being on the hook for basically everything that happens to the home. That bank is collecting your steady payments over 30 years, making them rich.
Sethi touches on mortgages on his show. Not everyone should own a home, and in fact many people would have much better lives, mentally and financially, if they chose not to own a home. Kreil’s advice to become rich is to avoid debt like the plague, and only own assets. Refrain from car loans, mortgages, or any other liability because all you are doing is decreasing your ability to save money. Taking on debt is simply funding someone else’s rich life. Kreil advised renting and living with roommates, and most of all saving money. That money allows you—like the bank—to own assets (owning a home outright is actually an asset). Astutely, Kreil mentions that the most valuable asset is owning a business, and indeed those who have seen the largest increase in riches since the 20th century are business owners.
But let’s step back a minute because I am close to bringing this full circle. The final element here is the messages we receive as Americans.
I want to say personally, there is no place I find more depressing than a nursing home. Seeing a bunch of old people (no offense) alone and being cared for by people they don’t even know honestly seems like a version of hell (no offense to those who staff these places—sadly someone needs to fill this demand). The crazier part is, this is one of the few countries where this happens at a large scale. In most places, the youth live in multigenerational homes and take care of their parents. Here in the U.S., many of us live alone or in nuclear families, letting our parents live alone until they can no longer sustain life independently, then shuffle them off to a nursing home while the children continue to work fulltime. Why?
Not only do nursing homes themselves seem like cruel institutions, but the very reason everyone needs to work so hard in the first place is because we are conditioned to be individualistic. To live in our own home without our parents, drive our own cars, work a high powered job—did we ever step back and think that the only reason we are told these things is so that we continue to buy more things which forces us to work even more? To take on more debt to fund someone else’s riches? Largely abandon our elders so that instead we continue working for someone else (and not our family); while also paying the nursing home who is yet another entity subtracting from our family’s earnings?
Happiness is largely a matter of perception, and when your perception is the brainwashed version of being individualistic and materialistic, you end up taking on a mortgage, car loan, or any other debt instrument that is simply funding a richer person’s pursuit of more individualism and materialism. If we truly think about what quality of life should be, would spending less time at work and more time with the people you love be a better use of time? Would pooling together resources and living with your parents or friends be worth it if it meant working (potentially a lot) less? Or is the stress of making a payment, getting that new promotion, or spending hours and hours at work worth the independence and time away from those you love?
These decision exist on a spectrum, they are not either or. Additionally, I am aware that—in the context of this country—what I am saying is rather radical2; yet examined from an international lens what I am forwarding is a lot less radical—perhaps even reasonable. Many people around the world still adopt a village mindset, though we chose to do away with it here long ago. When I had an internship in Eastern Europe, I remember working “full days” and compared to what I was used to in the US, the Eastern European workday didn’t really even seem like work. If you’ve been paying attention to international news lately, you will know the French have been rioting in the streets over the increased retirement (pension) age. Why? Because the French along with many Europeans strongly believe in valuing life outside of work.
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I’ve been thinking about the affordability crisis lately. And yes the crisis does exist, but largely because of how we organize our society. If we adopted more of a village mindset, and shared our possessions, knowledge, and time, affordability would be much less of an issue. The fact that nearly half of younger adults are now living with their parents is proof that the organic organization of humans (including those in this country prior to the 20th century)—not only from an economical standpoint but from a social standpoint—is multigenerational households and the sharing of resources. It just so happens that the endless pursuit of profits and ladeling Americans with debt has begun to revert the youngest adults back to the norm.
Disclaimer: This is not professional and/or financial advice. This content is for informational purposes only. Before making any financial decisions you should do your own research, evaluate your financial situation, and/or consult a financial professional.
With the exception of those who were able to lock-in low rates, mortgages originating today have rates closer to historical averages. In fact, a 12% mortgages were not out of the question in the 1980s. Even a 6% mortgage today, historically speaking, is a great rate. Still, the real estate market has cooled off significantly to a worrying point. Now prices remain high which is an impediment, but still a 6% mortgage rate is hardly arduous financially—at least it shouldn’t be. But the market indicates it’s a burden that many Americans simply cannot afford.
The fact that one-third of Americans say it is bad that more young adults are living with their parents shows how deeply the individualistic mindset is rooted in American society.