Friday, August 15, 2008

When Did the American Dream Become a Mortgage?

And when did the American Dream become a mortgage on a house you can't afford? Of course people don't even know how to figure out what they can afford. Accept whatever the "bank" says they can afford to pay for a monthly payment. (Though with all these ARMs adjusting to payments they can't afford, it seems they don't even know how to determine that.) People just sign whatever documents the real-estate agents and loan-officers put in front of them. (Lawyers look over a contract? Whatever for?) Part of this is the schools. We aren't educating people. Is it any wonder that they don't act like educated consumers?

Once upon a time, I had a job that paid six figures. I hated the job, in part because it was actually killing me. (Everything from acid reflux to high blood pressure. Lack of sleep. Headaches.) But even when I was making six figures I had the sense not to sign up for the insane mortgages that I was offered. I drove an old car. (It was a typical corporate sedan, with leather interior, but it was 8 years old when I left that job.) I lived within my means, and I saved money - not just in my 401K.

Oh, I had a house, of course. 3 bedrooms. 3 bathrooms. Fireplace in the living room. Fireplace in the family room. Wet bar in the family room. A separate room for a pool table. (Somehow, I never bought a pool table.) It didn't make me happy. In fact I came to hate that house even after I had remodeled most of it.

When I live on my boat, I have about the space I had in my old kitchen. But that space includes 2 sleeping compartments, a head (bathroom to you land-lovers) a galley and a salon (or saloon - depends on where you are from - which is a living room to you land-lovers). That space also includes a diesel engine, fuel tank, water tanks, black-water holding tank and associated pumps. Not to mention all of the sailing paraphernalia - like life vests, flares, navigation equipment and charts etc. It was much better than the house.

Hunter 37 cutter interior layout
The overall length is 37 feet, at its widest it is 11 feet, 9 inches. Not a lot of space, but more than enough for 1 person. All the way forward is anchor storage, followed by a v-berth. (In theory this is for 2 people and it does work if you are prepared to be cozy.) Next is a head with a shower to starboard, with a hanging locker and sink to port. Then the salon with aft-facing navigation table and two settees. Galley to starboard with 2-burner stove, double sink and icebox - now converted to refrigeration. The quarterberth cabin is to port. Fuel is stored under the quaterberth. Water under the settees. Holding tank is under part of the v-berth. Engine is under the cockpit. Water heater is also under the cockpit.
Why was it better than the house?

One. It was paid for with cash. As most of the people who entered foreclosure have discovered, having a loan can be a problem. I still pay rent on a boat slip, and it is too much, but I have the option of moving to a less expensive place.

Two. How much room does one person need? I didn't need 3 bedrooms. (For a part of that time, I had a friend living in one of the other rooms - she lost her lease on a condo suddenly.) I never bought a pool table, and didn't use that space for anything - not even storage. I never used the fireplaces and only used the formal dining room once and that was for a wine tasting.

Incidentally, paying cash for purchases, even large purchases like a boat or a car, used to be a cornerstone of American life. Don't have the money for a car? Open a new savings account and every month make a car payment to that account. In 4 years you will be able to pay cash for a new car (I never buy new cars, but that is another story.) And it will cost you significantly less than if you finance. Do you even know how much the finance charges on your car loan cost? I didn't think so.

People always say - egged on by real estate agents - that "Their home is their biggest investment." However, from an accounting point of view, there are really only assets and liabilities. And as all these people in foreclosure have discovered, a property that does not generate income - like your primary residence - is only a liability. (How long could you pay your mortgage if you lost your job?)

But the houses are getting bigger, even as the families are getting smaller. People are spending more time at work, and having less time for the things that really matter. When was the last time you had a group of friends over for dinner? A holiday? The Super Bowl probably doesn't count. How much time do you spend with family? What is really important? A big house, or a home? Family and friends or that corner office? And don't laugh, I have seen people answer that question with "the corner office." You won't wish you spent more time at work when you reach the end of your life. Have you decided what the imporant things in your life are?

The American Dream used to involve things like self-reliance, meeting new challenges, making something of yourself. Do you think the frontier got settled by people looking for better kitchens or a bigger master-bedroom suite? Do you think this country was built by people who worried about the color of paint on the kitchen walls? The dream used to involve things like standing on your own, making your way in the world. The religious would worry about using their talents for the betterment of society. Today the American Dream seems to be about how much stuff you can get, how much stuff you can get from government, and sticking it to "The Rich." Or can you get the most amount of money with the least amount of work. Do you think the people busting sod on the frontier were worried about how big their log cabin was, or do you think they left "home" (whether that was the east coast or the Old World) because they were looking for an easy time of it?

I think we have reached that stage in the evolution of societies, that in the Roman Empire is usually referred to as "bread and circuses." We spend more time worrying about Britney or Lindsay than we do about the standing of the dollar internationally. We spend more time understanding the stats surrounding baseball or NASCAR than we do understanding the investment options for our 401Ks. We spend more time with "Survivor" or "American Idol" than we do with family or friends.

We've traded the dream of independence for the dream of easy credit. Instead of taking responsibility for ourselves and our actions, we lay blame on everyone around us. (It isn't my fault I signed up for a mortgage I can't afford, it is the eeeevil bankers fault.) From my perspective, that isn't much of a dream.

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