Sunday, February 5, 2023

The Ephemeral Nature of Wealth

Much of modern wealth is heavily leveraged:

  • People seldom own their homes outright - they are PERMITTED to live there, providing they pay a set amount monthly. They can deduct some small part of that (the interest) off their owed taxes. But, make no mistake about it - you, generally, do NOT own your residence. And, should you be the rare person who actually is able to pay off the loan in full, the government will force you to pay money every year - it's called real estate taxes - for that 'privilege'.
  • Governments LOVE real estate appreciation - that is a mechanism that allows them to raise the taxes owed, without having to go back to the voters for permission to do so. Eventually, many 'homeowners' are forced to sell, due to the inability to continuing paying inflated taxes on fixed incomes. All the better! That way, the scoundrels in government can tell their lies without any citizen having the memory of previous statements to challenge those 'not-truths'.
  • Modern schools are expensive - often poorly designed and built (necessitating expensive repairs in the future), with lengthy time periods to pay off the bonds used to finance them, and sitting essentially empty for 2-3 months of the year. I know few districts that have fully-paid-for schools; most taxpayers will be paying through their taxes forever - or, at least, until they move to another district/state.
  • Investments - seldom do people just put their money into a business or land. Instead, they are encouraged to 'invest' in bonds (Essentially, a loan to a business, which USED to be a safe investment. In the last couple of decades, courts have sided with the businesses). Those that invest in stocks have NO claim on their money. Much of US retirement investments are heavily leveraged. Most pensioners would be entitled to little if the investments on which their income depends go sour.
  • Same with bank investments. Thanks to the "Miracle of the Federal Reserve", money that is put into an account with a bank is multiplied, really, quite like the Loaves and Fishes. It's worth something, because the Federal Reserve SAYS it is worth something.
  • Wealth in the form of possessions:
    • Furniture, electronics, clothing - Markup is heavy, and depreciation is almost immediate. Unlike the UBF (Ugly Brown Furniture), modern furniture is NOT built to last - something that can be said for most other consumer items. The loan (should those items be bought on credit) will last longer than the things purchased.
    • Vacation homes - waste of money, unless fully paid for (and, not in the middle of a swamp). If you want to buy a home in the hills/backwoods, with access to fresh water, fuel, and food, and are willing to set up power production for all else, OK. That would be a decent investment. But, it better be far from level land, which might otherwise - due to the value it has for developers -  be bought and make that home unlivable, at least as a bare-bones homestead. While you're at it, buy a BIG piece of land around your cabin.
    • Cars - Please! Very few people actually BUY a car today. Most lease one. And, new or used is a trade-off. If you're handy, a used car is a good investment. If you're not, a new car makes some sense, as long as you keep it for 8-10 years, at least - and, while you're at it, make friends with some good mechanics.
The so-called Rich are as likely as most (some are MORE likely) to be very highly leveraged. That accounts for all the guys that are completely broke only a few years after hitting it big.

What helps you keep what you make/have?

Live simply. You don't have to live at the level of the Amish, just plan to leave yourself a comfortable cushion between what you make and what you spend. When considering purchasing something, first check to see if you might find it at a resale shop. For those on Facebook, the Marketplace is a great source for inexpensive household items, often with little wear.

Talk to your kids about careers - they may make out better going to trade school than to college. And, for many careers, consider a step down - nurse or other health professional, rather than doctor; paraprofessional rather than lawyer. In terms of actual take-home pay, they may end up with more money, and less stress.

In business, it's better to gain some experience before spending all the money for college and an MBA. If you think you might want to own your own business, try commission sales - ALL businesses start with sales. And, operating off a commission income will tell you whether a variable income works for you. 

Marry smart. Find someone who shares your values, and give them attention. Women (And, men, too) who are neglected or lonely are prey to infidelity. It's not generally the sex, it's the attention.

Budget. You don't have to be obsessive about it, just have a good handle on the money going in and out, and take your time thinking about it before you sign any contracts to pay on credit. Periodically, go over your expenditures, looking for those "sneaky" expenses - money going out for something you no longer need, money accumulating in a poor investment, indulgences you no longer even notice - I re-captured HUNDREDS of dollars in the first year after I retired by checking the automatic/regular purchases.

No comments:

Post a Comment