America is the land of free enterprise, capitalism, economic prosperity, and liberty for all. While material possessions flourish in this land, there is more than meets the eye. From cars, houses, technology, and more, the middle-class United States citizen appears to have it all. But are these people truly well off financially? Is there real financial freedom in the land of the free?
After taking a deeper look, working Americans may not be as well off as you think. Behind most houses are conventional mortgages; behind that brand-new truck is a car loan; behind most careers are student loans; behind vacations is credit card debt; and behind appliances, expensive tech, and more are payment plans.
Meet 28-year-old Jeff (a fake person based on national averages). Jeff is a married man whose wage puts him in the United States middle class (42k-127k for couples - Investopedia). On the outside, it appears Jeff has it made. He pulls up to his three-bed two, two-bath home in his 2019 GMC Sierra. Jeff received an undergrad degree in business administration and has worked full-time since he graduated six years ago. For the cherry on top, Jeff and his wife just got back from a vacation to Europe! At first look, Jeff's life seems like it embodies the American dream full of prosperity and hope. But is this really the case? Let's take a closer look.
Jeff listened to his uncle, who told him he could get an FHA loan with only 3% down. For only a $7,500 down payment, and with Jeff's new salary out of college, he jumped on the opportunity to move himself and his wife into their first $250k home. Besides, you're just throwing money away renting, right? Of course, to afford the mortgage payment, Jeff set up a 30-year conventional home loan.
Jeff had always wanted a black GMC Sierra. A Super Bowl commercial told him he could have one for only $500 a month. So, Jeff went to his local dealer and got a car loan for his dream truck.
Jeff has student loans from his degree and has a monthly payment of $500. Oh, and the vacation he and his wife just went on, they did not quite save enough in preparation, so they had to put the rest on their credit card, adding to their credit card debt.
So Jeff, the man who seems to have it all, in reality, has all the monthly payments. Before he knew it, he was drowning in his debts. With little to no monthly margin, Jeff can't improve his overall financial freedom. He feels trapped by his bank, the car dealership, student aid, and American Express, who take his hard-earned income every single month. Interest begins to pile, stress begins to settle in, his car depreciates, and the worry of one thing going wrong haunts him on the daily. What if he loses his job? What if the water heater goes out? What if an emergency happens and he cannot afford the needed remedies and has to go into more debt? How did he end up here? Everyone told him he could afford it, that this was normal and the only way to have the things he wanted for himself and his family.
This is the unfortunate reality for so many American citizens. In the name of prosperity, hard-working people like Jeff are led into the traps of financing, payments, and interest entanglement. Credit card debt in the U.S. just hit record highs breaking one trillion dollars. According to a study done by Capital One, 73% of Americans rank their financial situation as their number one cause of stress in their life. A CNN study found that 76% of Americans live paycheck to paycheck, just like Jeff. Furthermore, financial stress causes things such as divorce, illness, suicidal thoughts, and more. In Proverbs 22:7, it says, "the borrower is a slave to the lender." This principle rings true, and sadly, the vast majority of Americans live it.
Is it possible to avoid these mistakes? Can people like Jeff get out of their current situation and achieve financial freedom? How do the 27% of Americans who are not stressed win with money? Stay tuned next week as we tackle this issue, review financial advice from various experts, give practical tips, and break down personal finance tools to help you win with money.
