Thursday, November 22, 2012

Externalizing, Revisited

Wake up!  Stop feeling sorry for yourself and blaming all your problems on unseen others!

When I started this blog, I was trying to figure out "where all the money went".   After all, I was making a good living and made good money in Real Estate.  And yet, it seemed, no matter how much I made, the bills were always there and it was always a struggle to make ends meet.

I had assumed that once I was "making good money" that someday I could just spend as I pleased, and there would be plenty left over at the end of the month.   Such was not to be.  Just as Boyle's law dictates that gas expands to fill a vessel, spending expands to fill a salary - unless you decide to do something about it.

And legions of Americans - at all income levels - end up in the same trap.   People tell me they are living "paycheck to paycheck" on $50,000 a year, $100,000 a year, $174,000 a year, and even $250,000 a year.

Funny thing is, though, the median income in this country is about $51,000 per household.  And people are born, grow up, live and die, on this salary and do just fine, over time.   So why the "struggle" to live on that much money - or two, three, or five times as much?

And inevitably, people say, "Well, it's the government's fault!" or "It's Wall Street's Fault!" or "it's the Big Bank's Fault!" or "Its the fault of those people on Welfare!"

And while there is a small (very small) nugget of truth in these statements, they do no account for the overall situation.   Yes, you would be wealthier if you paid less taxes.  Not a lot wealthier, but a little bit.  Lowering the marginal rates by 3% during the Bush era didn't make anyone a Millionaire.   And yea, there are a lot of shenanigans on Wall Street, and if you played their game, like buying IPO stocks, you could lose a lot.   And yes, the banks offer odious mortgages and credit card deals, and if you signed up for them, you could be in a lot of trouble.  If you sign up for them.

But the interesting thing I found out, writing this blog, was that what the real problem was, was not these "other people" screwing up my life, but things I did to screw it up.   Simply stated, I spent more than I made, or more precisely, I didn't save as much as I should have.   Real wealth, I figured out, is in your net worth, not in your garage or your cell phone.

And it became readily apparent that what I did was far more important than those "other actors" in the equation.   In fact, it is about 99.9% of the deal.

So, while it would be nice to pass a law outlawing "funny money mortgages" - and they have taken steps in this direction - a better idea would be not to sign one.

And while the availability of "Liar's Loans" certainly put fuel in the fire of the Real Estate Meltdown of 2007, it was people like you and me who signed those loan documents, bought the overpriced mini-mansions, and deluded ourselves that we all would get rich.

But of course, no one wants to hear that.  It has to be the mean old Bank's fault, for enticing us with those loans.  Or maybe those Minorities (code for N-word) who took out all those mortgages under the Community Reinvestment Act - and then defaulted!   Yes, they brought down the price of houses!

Actually, not really.  Not really even close.    When a two-bedroom condo in Florida is selling for $850,000 and has a $3,000 a month condo fee, and all of the buyers are buying them as speculative investments, this has nothing to do with the "Community Reinvestment Act" and poor people buying $50,000 homes in the ghetto.   When housing prices went up to the point that it cost 3-5 times as much to own as it did to rent, that was pure greed and idiocy on the part of the buyers.  And yes, I said the buyers, not the sellers.   Only buyers set prices.

And a lot of people made foolish mistakes.   And I know these folks - they are my friends and acquaintances.   Some bought houses as investments hoping to "flip" them quickly, even though they were huge negative-cash-flow deals.  Others bought "look-at-me!" houses, convinced their ship had come in, and that they could afford granite counter-tops and a three-car garage because a salesman told them they could.

They suspended disbelief and signed the papers.  And each sale created a new market value for such properties, and the prices kept going up, and up, and up, until it reached a point where no one could afford to buy - and the smarter people said, "Gee, this doesn't look so swell."

It was people who drove this market, not Fannie Mae.   Would more onerous mortgage requirements have dampened the market?   Perhaps.  And we are seeing this today, and people are complaining about it - that the banks are saying, "Gee, you have to prove you can pay this back!" - as if it were a bad thing.

And that is the Catch-22 of this whole deal.   Citizens blame "others" for their woes, and then petition the government to fix things.  The government does so, and then the same citizens complain it is too much interference!  Pick one.

Yes, it would be nice if the excesses of the credit card industry were reined in.  And the new Consumer Finance Protection Bureau is doing just that.   But odious deals with credit cards still abound.  And if you get a $20,000-limit 25% interest credit card, on the premise you are getting "flyer miles" or "cash back" it can - and likely will - bite you on the ass over time.   The government can take steps to protect you, but you have to be the one to say "no" to the temptation.   Leave your pen at home!

No, what I have learned, after years of penny-pinching and scrimping, is that the real actor in all these deals is ME and only ME.  Blaming other people is just weak thinking at its worst - and emotional thinking as well.

And yet, this is a popular sport in the US of A.  Go on any news channel or news site, and you will see people blaming the Blacks, the big corporations, Wall Street, or the Banks for their personal woes as well as the woes of a nation.  Our own actions are never suspect - and not even up for discussion!   To hear most people talk, they are as innocent as newborn babies - and victims of the actions of others.

And yes, even the people who decry the victim mentality are really just using that to deflect blame from their own actions.   "I would be a Billionaire," they posit, "if it weren't for everyone else claiming to be a victim."   Irony is lost on most folks.

You do have choices in life.  All it takes to get ahead is to act rationally in an irrational world and you will succeed.  Most people, if they do succeed in life, do so because they acted somewhat rationally over time.   Those who fail, in most cases, do so because they engaged in emotional thinking and wishful thinking and blame-shifting and self-pity.

And the latter are often called "losers" which sound kind of cruel, but is often apt.   You know the type, the sad-sack-of-shit who laments for hours about what a raw deal he got out of life and how difficult it is for him - and how unfair it all is - and how it is someone else's fault.   And usually, he is texting this crap to you from his iPhone or some other nonsense.

It is like the friend of mine, complaining how rotten they have it, and how "lucky" I am, while we are riding around in their $40,000 leased car that gets 12 miles per gallon.  "We're living paycheck to paycheck!" they cry.  Gee, I wonder why that is?  It must be someone else's fault.   Those mean old oil companies, perhaps.

Or the fellow who delivered concrete, telling us how rotten he had it, and how he was investing in Glen Beck's gold, and how the economy has tanked.   Then a fellow drives by and says, "There you are, I've been calling for a week now, leaving you messages!  I have  big job for you!"   The connection between running his business and his own personal success is just not there.   He is spending more time worrying about the price of gold than the price of concrete - and blaming the President for his woes.

Getting ahead in the world means you have to chuck all of that sort of crap - entirely - and take responsibility for your own actions.  And this may mean finding new friends, if your existing ones are the types who like to sit around and moan and groan about how rotten it all is,  or forward conspiracy-theory e-mails.   You need to reset your brain and start over, and stop letting people like that program it with "ain't it awful" and "let's feel sorry for ourselves".

(And this means, of course, unplugging from the TeeVee, which is the monster of all poor normative cues programming.)

Because, let's face it, if you are reading this, you are one of the minority on the planet who can (a) read, and (b) has access to a computer.   No one feels sorry for you.   On a planet-wide scale, you are one of those 1%'ers.   Start acting like it.