A few days ago I noticed my neighbor, the master gardener had already started watering her lawn. She really is a master gardener. She not only teaches classes, but has a beautifully landscaped yard filled with flowers, bushes, and trees, all beautifully arranged and meticulously maintained. This morning, I dragged out one of my hoses and my sprinkler. The lawns around here are getting a little brown in places. When I lived in Maryland, a less than perfectly green lawn would not have mattered at all. Less than half the neighborhood cared much about the state of their grass. If it was green most of the year they were happy. A few weeds? Who cares? Now I pay the Chemical Warfare Service to come out nine times a year to fight off uninvited plants who have the unmitigated gall to grow in my yard. I even have a gallon spray jug of Round Up to maintain order between treatments. What has changed? Expectations. Instead of living in a neighborhood of 40 year old tract homes inhabited by people who generally minded their own business, I live in a new much more upscale development inhabited by people who expect the Home Owners Association to keep watch over their neighbors’ comings and goings. It is more than that. Most of my immediate neighbors really care about the condition of their lawn. They either spend a lot of their own time doing yard work, or like me, they pay someone else to maintain the illusion of suburban agricultural perfection. A few days ago, I shared a blog post on The Secret Shame of Middle Class Americans written by Neal Gabler. Evidently I wasn’t the only person that found it upsetting enough to share. I have since discovered it is going viral. Think about it. A man who was earning something in the neighborhood of $200,000 a year can’t put his hands on $400 in cash to cover an emergency. The Money Equation:
Money In = Money Stored + Money Out
I believe what really upset me was that Gabler grabbed the brass ring. He was a winner in a profession that produces real estate novelists, bar tending poets, and retired engineers who write personal finance blogs. He handled the left hand side of the money equation beautifully. This is the hard part. Then he blew the right hand side of the equation. What was he thinking about living in the Hamptons, one of the most expensive addresses in the New York area? There are not only the obvious costs of living in a super zip code, but whether or not you choose to fight the urge, you are going to at least want to keep up with the Jones.
If your neighbors all drive new BMWs or better, how long will you continue to own that 16 year old beater?
If your neighbors’ children attend elite private schools, are you going to continue sending your little prince to the local elementary school?
If your neighbor invites you to play golf at a country club you can’t afford, will you say, “No?”
If Gabler chose to live somewhere in central New Jersey and commute to New York, I expect he might not need to write this confessional. The public schools located around Princeton University are not surprisingly some of the best in the country, there are some privately owned golf courses in the area that are affordable, leaving you more money to buy a new—Camry?
Gabler wasn’t properly evaluating risk. His career as a journalist turned out to be not all that stable. He didn’t properly evaluate the future costs associated with raising his children. Their college educations not only wiped out his pathetic savings, but diminished the savings of their grandparents to the point there won’t be any inheritance to help with his retirement.
There is no guarantee that your salary will continue to grow at a rate to cover all your mistakes. This is a common error made by medical doctors and other high income earners. It is a certainty that unplanned expenses and unfortunate losses of capital and income will occur over the course of your life. If you haven’t prepared for those eventualities you will end up like the 47% of Americans who can’t cover a $400 emergency.
It is hard to define the middle class. Everyone believes they are a member of the middle class even if they are really belong to the working poor or are rich. I am becoming more convinced that class is a mindset rather than a number. The middle class is concerned with consumption. They define themselves as the possessions and lifestyle that one would associate with “middle class,” whether they can afford it or not. The middle class thinks month to month. If they are living a life consistent with their expectations and covering the monthly payments, it’s all good.
Neal Gabler did not understand the difference between rich and wealthy. The billionaire, Michael Sonnenfeldt tried to explain the concept. “What’s seen is the money they made, but what’s unseen is the choices that they have made. It’s what allows them to continue to be wealthy. It’s more about taking a very long view with all the potential negatives that we all fear.”
Those who were truly wealthy, whether they were a retired school teacher living on his pension or a billionaire living in the Hamptons have enough. This is what I term financial freedom.
A man could be rich and still be living paycheck to paycheck.
Such a man can never be wealthy.