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From American Dream to American Horror Story

  October 6, 2014  |    #Eliminate Debt

The American Dream

To own our own home is the American dream. The archetype of this dream is a single-family home with a yard, a white picket fence and a dog. To be sure, a home of any kind is what most Americans dream of for themselves and their families. Essentially, we all want a place to call our own, a place to feel safe and a place of familiarity.

The American toy, on the other hand, is a car of our own. Ever since Henry Ford took his black Model-T to the masses, Americans have dreamt of a car of their own to hit the open highway and go where destiny takes them. Some roads, such as A1A (Beach Front Avenue!) and Route 66, are famous because of the images they conjure in our heads of driving our prized possession by onlookers or on a horizon stretched journey.

American Horror Story

Just as having too many sweets before bedtime can cause nightmares, letting our dreams rule our real lives can cause real life horror stories. Both possessions, a home and car, can put us into financial trouble if we don’t make the right choices. History is replete with stories of people buying too much house or too much car, and then needing to downsize. Best case scenarios include a sale. Worse case scenarios include a bank repossession or foreclosure. Imagine watching as your prized BMW 330i is towed away by the repo man. Unfortunately, we hear these stories all too often.

According to the Bureau of Labor Statistics (BLS), a whopping 51 percent of all household spending goes towards housing and transportation. For many Americans, this equates to spending half or more of their incomes on only these two categories. This means that 50 percent or more of all their work is to pay for a home and a car. Interestingly enough, most cars sit in parking lots or driveways 90 percent of the time and homes sit vacant more than 10 to 12 hours a day.

This is where the American Horror Story can turn into the American Dream.

According to RealtyTrac, the current average mortgage payment in the 4th quarter of 2013 was $865. Per AAA, the average annual cost to own a car is $9,150 and the average annual cost to own an SUV is $11,600.

We all have our own goals and dreams and it’s up to each of us to decide what we want from life. Each of us must adjust our lives accordingly. In many cases, however, managing housing and transportation expenses better would put many Americans into much better financial situations.

What if we shaved 5 percent off the costs of our house and cars? Could we buy less house or less car? How much would we save?  On car expenses, we could save $454.50 annually. On a house, we could save about $519 annually. That’s not worth it you say?

As many financial experts claim, it’s not about how much money you make, but how much money you save and invest. Cutting expenses, even by a little, to put towards savings and investing, can put one on the path to a more prosperous and secure financial future.

An annual investment of $973.50 ($454.50 for the car + $519 for the house) with a moderate 6 percent return would yield nearly $38,000 over 20 years. How would that improve your retirement savings?

Are you directing an American Horror Story or an American Dream for yourself? Tell us how you invest the money you save. We’d love to hear from you.

One response to “From American Dream to American Horror Story

  1. I like to believe I’m directing my American Dream (my wife is serving as the Executive Producer). The money we save is invested in our Thrift Savings Plans and Roth IRAs. We live by the old maxim of "pay yourself first." It has served us well over the last 13 years and I imagine it will carry us into retirement in the next 12 years.

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