093008

Which One Will You Choose

                                        Yesterday vs. Today

Before I begin this article I will warn you that it is probably longer than most I have sent out. I also am
urging each and every one of you to please take the time to read every word of it and to more importantly
take some action.

I had an interesting conversation with my mom the other day about the economy. One of the situations that
she attributed our current situation was the “creative financing” that was put into place so that people could
buy and/or refinance their homes. My mom told me,“100% financing didn’t exist when your dad and I
bought our house. We had to put down 20%.” I reminded her that 20% for their first home was
$7200.00. “Yes, but dad didn’t make much money back then either.” This peaked my interest. I decided to
do a bit of research to see how much things really have changed between then and now. First of all the
home they bought in Colorado Springs is now worth about $150,000.00. So a 20% down payment would
now be $30,000.00. What is basically a down payment on that home now, almost equaled the purchase
price paid 21 years ago. Times do definitely change.

Let’s look at income levels. Have they risen? Of course but here is an interesting fact. What has caused the
biggest economic shift in the last 20 years is that millions and millions of mothers have entered the work
force.   A woman in 1970 who had a 16 year old child was less likely to be in the work force than a woman in
2003 that had a six month old child. This is a profound shift in the American way of life. Since this has
happened, you would imagine that median household income would have greatly increased. Keep in mind the
numbers I’m using are inflation adjusted. So here is the first interesting fact that I discovered. While the
median household income went up, the median income for males working full time actually went down. That
means that a middle class man who is working full time is making about $800.00 less than his dad did. What
that means is that median family income rose, but only because there were now two incomes coming into a
home.
Incomes still went up so we should be a richer generation right? Well let’s take a look at savings. In the 70’s
families were putting away about 11% of their income into savings. By 2006 we had a negative savings. So
for the last four or five years the average middle class family has been putting nothing into savings.

What about debt? In the 70’s the average middle class family spent 1.5% of their income on credit card
debt, this has increased to 15% in the 2000’s. The big question is what are we spending our money on?
Clothes right? I mean you see how packed the malls are and the designer labels that people are sporting.
Well actually the amount of money spent on clothes has decreased from the 1970’s to the 2000’s by 32%.
OK, so maybe it’s food. I remember when I was a kid going out to dinner was a really big deal, but since it
isn’t now we’ll include that. 18% decrease. Appliances saw a 52% decrease and the cost of owning and
operating a car has decreased by 24%.

What has gone up is scary. Housing prices have seen a 76% increase. We’ve seen an increase of 74% in
health care (this by the way is with employee sponsored insurance). We’ve experienced a 43% increase in
cars (yes it costs 24% less to own and operate one, but we now are a two car household). Child care has
basically increased 100% since the 70’s. What about taxes? There has been a 25% increase in taxes since
the last generation.

It’s important to take a look at the ups and the downs in the economy. What you will notice is that the
things that have gone down are the flexible things. The things you can “tighten your belt” on. The
expenses that have increased significantly are the basic expenses. The stuff you have to pay for regardless
of circumstances. Using again inflation adjusted numbers, the average household made $32,000.00 a year in
the 70’s compared to $73,000.00 in the 2000’s; however, 50% of the household money was spent on basic
expenses in the 70’s compared to 75% today. This basically means that people today have less money left
over after paying their basic expenses then the generation of the 70’s.

Here are some other realities that we have to deal with in this generation. People are far more likely to lose
their jobs because of layoffs and out-sourcing. No job, no mortgage payments.

Health care is totally different now. Previously a mom that gave birth without having a cesarean spent
approximately five days in the hospital. Today she stays 24 hours if she has no problems.   People are
being sent home following surgery with tubes and bandages in place with instruction for their “care giver” on
how to change and clean them. There is an unknown saying in the health care industry, “get them out
quicker and sicker.” The problem is, the care giver is probably working to pay the necessities. What if your
mom or dad were ill, or your spouse or significant other, or you child? Who is going to be cleaning their
tubes and bandages while you’re at work? Are you going to be able to afford hiring someone to do that
while you go to work?

By the way, this all implies that you have health insurance. More and more people are losing their benefits
every day. In 2001 1.4 million people lost their insurance and of those 800 thousand made more than
$75,000.00 per year.

So right now we are seeing firsthand the devastation of a basic economic mess. It’s not going to get better
regardless of whether that 700 billion dollar “fix” bill is passed. That’s like putting a Band Aid on a severed
artery. You might see the bleeding stop for a minute, but it will start gushing very shortly afterward.

What can the government do to help us? The answer is, I don’t know and I don’t think anyone else out
there does. There is however a solution. It is time to stop focusing on what our government can do to help
our personal economic status and start taking control of it yourself. If you have one source of income right
now then you are either broke, or not too far from it. The numbers don’t lie. We aren’t putting away money
for our future. More and more of us are without healthcare. Facing the loss of a job leaves you with the
support of an unemployment check, which barely covers your basic survival expenses.
Do you want a life of financial freedom? Do you want to be financially free to the point that if something did
happen to your job you wouldn’t worry how you were going to pay the basic bills? If there is a health issue
with a loved one, do you want to be able to be financially secure enough to care for them? You can’t if you
have only one source of income. I don’t mean another person in your family working either, I mean you
yourself having more than one source of income.

What are these sources of additional income? Tell people about a new health drink that you found that has
helped change your life. Help people learn to make foods at home that are healthy and inexpensive. Tell
people about cleaning products that aren’t only good for the environment, but cost less than retail
products. Get educated in real estate and start producing income using your new knowledge. I don’t mean
by buying homes either, there are a lot of different ways to make money in real estate that doesn’t cost a
dime, but you have to get educated. Send people to other sites to buy products that you recommend and
get paid for doing that. All of these things are available to you. They aren’t going to come knocking at your
door though, you have to go out and get them. If you are serious about owning your financial freedom to
the point that I think you are then the time to act is now! The favorite word of people who wait for the world
to take care of them is “tomorrow”. The favorite word of warriors who decide to create their reality is
“action”. Which one will you choose?

If you haven't already seen it, I would suggest watching the movie "Maxed Out:Hard Times, Easy Credit and the Era of
Predatory Lenders." I'm sure you can rent it, I know Netflix has it and if you have Showtime, they are currently playing it.