In the midst of the current financial
difficulties in our country I am reminded of the folly of following
the cultural path of least resistance. It seems that popular culture
continuously seeks to dictate to us what things we should want and how
we should go about getting them. The over-arching theme is an incessant
clamor that we need more, bigger (or smaller if technology is the subject)
and better material possessions, and we need them NOW. The thought of
saving and purchasing with cash has become such a foreign concept in
our time that it has all but disappeared from popular culture. After
all, why wait to get that vehicle or that gadget that you believe will
make you happy when you can simply swipe a credit card or sign on the
dotted line and have it immediately. In fact, by the standards of today,
a person’s wealth is no longer defined by the things that they actually
own, but rather by their ability to juggle the payments on the things
that they purchase with credit. If you think I am exaggerating, consider
the following question: When making a major purchase (i.e. a car or
house) what is the first question that comes to mind? I would venture
a guess that the first question is “can I afford the payment?”
Don’t get me wrong, I like having
nice material possessions and I don’t own my house out-right. But
I believe that there is value in pointing out the cost of following
the cultural path of least resistance. The cost comes in the form of
interest. For example, if someone follows the status-quo they would
most likely purchase a new vehicle with a 5 year loan. But what few
will acknowledge is that the average vehicle has a usable life of approximately
5 years (at least before the maintenance becomes a greater cost than
the payment). What that means in practical terms is that just about
the time the payments and interest end you will probably need (or want)
a new vehicle. This scenario played out in several areas of a person’s
finances will result in a perpetual interest payment, or as one financial
advisor said “we are spending tomorrow’s money on things we used
yesterday.”
In contrast, if we were to apply just
a small portion of personal discipline to our purchasing, the bank would
be paying us instead of us paying the bank. If we are determined to
live just slightly below our means we could save for purchases and earn
interest instead of paying interest. It’s a counter-cultural concept,
but it’s one that would pay-off in the end…
