Every book on millionaires suggests that true wealth is built up over time. However, if you take a drive through your neighborhood, observe what the majority of people aged 21-35 are driving. Notice the cell phones in their hands as they drive, or perhaps even a gourmet coffee.
My 2006 Highlander looks invisible and bland around these late model SUVs. Can they afford that expensive shiny SUV? No, not most if we do a little research.
In nearly every "I'm Rich after Being Deceived" book, they warn you of the many pretenders. This is often because the authors themselves were such pretenders.
Because of our financial mistakes my wife and I never got to participate in this status game much. We never looked wealthy unless you think Toyota Camrys are "the ultimate driving machine".
Moving forward, it's noted that over 70 percent of credit card users are unable to pay off their balance each month, incurring substantial interest charges. This raises the question: why would anyone choose to engage with companies perceived as unscrupulous? In some views, they are likened to upscale loan sharks, though perhaps without the 'upscale' part.
It is likely not a contentious point to say that three-quarters of Americans might be considered "fake rich." This may come as a relief to those who feel they are falling behind.
At first glance, one might think we're impoverished. My wife drives a Camry that's a decade old, and I get around in a 2006 Highlander. I'm writing this blog on an ancient HP laptop that I acquired in my teaching days during the 2010s. If I disconnect it, I've got roughly 15 minutes before it shuts down with a battery warning. My gaming collection includes a Sega Genesis with games I've yet to play, an original Xbox with a similar backlog, and a PlayStation 3. I had a used PlayStation 4, but I sold it before we moved because the collection was becoming too much.
That's essentially the situation with all the things we've accumulated, yet here I am, able to blog while the baby sleeps. Meanwhile, most people have to work to maintain the facade.
My wife will need to work for approximately four more years to sustain the standard of living to which we have become accustomed. We wouldn't be in distress, but certainly, some adjustments would be necessary. The huge issue for us now is Health Insurance.
Healthcare represents a significant challenge in retirement. In the past decade, we've allocated more funds to healthcare than in all our previous years of marriage combined. We anticipate the next decade to be similar, if not more demanding. Once healthcare expenses are wrangled, retirement will become much more manageable.
The significance of housing diminishes when one can comfortably reside in a one-bedroom, one-bathroom dwelling anywhere in the nation with minimal complications. It's quite astonishing how infrequently we entertain visitors from out of town. This observation prompts me to wonder about the necessity of two additional bedrooms for everyone.
But I digress............................
Here's our journey from the illusion of wealth to the reality of impending retirement.
Debt free: This milestone is monumental. We settled our last debts around 2015 and have avoided incurring any new ones since then. Encouraged by our parents, we also paid off the mortgage. This phase was likely the most crucial in our financial journey.
Cars with cash: Purchasing cars from private sellers is now the preferred method for us, as it's often where the best deals are found. It's advisable to invest $100 in a trusted mechanic to inspect the vehicle thoroughly.
Emergency Funds: This fund has been a lifesaver—like when we needed a new roof for our townhouse four years earlier than anticipated. It's set aside for the unforeseen yet inevitable events: car collisions, appliance malfunctions, hailstorms, fires, plumbing failures, floods, physical ailments, pet illnesses, and even job layoffs. We've established a fund for nearly every conceivable situation. It may drive my wife up the wall, but in times of widespread crisis, this fund is as comforting as mink.
Invest: We fully contribute to our 401K and HSA; simplicity is key. The complexity of a financial instrument equates to higher risk for us. If it's not understandable, we avoid it.
Insurance: Retirement brings many challenges, and one of the biggest is ensuring financial security. Insurance plans are crucial to prevent significant financial losses. However, the most substantial expense we face as we age is health care. Health insurance represents the final and most formidable mountain to climb. Studies indicate that an elderly individual could spend up to $300,000 on health care, even with insurance coverage. Securing robust health insurance is essential.
The "fake rich" often prioritize possessions. With an extra $600,000, one could purchase a luxurious house or a flashy car, yet the question remains: who will take care of our healthcare expenses? It's clear why this is a contentious issue.
How we know when we are no longer "fake rich"? Priorities shift.
Here are a few unmistakable indicators for us. If my wife were to come home today and say that a truck had ripped off the front end of the Camry, my primary concern would be her well-being. I would insist on her being thoroughly examined by a doctor first. In this blog, we will discuss insurance extensively. A serious health crisis could quickly lead to bankruptcy. Interestingly, I never considered health insurance seriously until I reached my late forties.
Regarding the cars, we have the cash ready to purchase another Camry. Moreover, if someone were to inform me that our Highlander has been damaged, we have the funds to travel to any location, acquire a replacement with comparable mileage, and drive it back home as if nothing occurred. It's not a significant issue anymore. Car insurance is nice and all, but we've learned some hard lessons in that area.
If houses, cars and stuff are second thoughts, you've probably moved beyond the "fake rich" crowd. We need to move from accumulating funds to distributing funds in retirement. If there are no funds to distribute.......................well, there's your answer.
I'm tired............................
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