The great American lie, number four: Consumption.
Updated: Dec 24
In this article I will explain how to build a psychological reward system for purchasing assets instead of liabilities, and how advertising has trained you to buy liabilities. Liabilities are assets that depreciate, or lose their value over time. Consumer goods such as; clothing, cars, computers, phones.
But from a very early age we are taught via advertising that these shiny objects of no future value are to be desired and purchased. This is a false perception. It is socially ingrained to make people feel as if they can obtain higher self worth based upon the things that they own, because others desire those same objects, and may even judge someone's character based upon ownership of those material assets. Or as I would say; liabilities. However, these items have no real value.
For the most part, consumer goods do not, in the long term, help you, instead, are certain to hurt your financial freedom. The only thing they guarantee, is that you'll stay on the work treadmill, and that every dollar that comes in the door goes back out the door, exactly as the advertisers and the producers want; for you to spend your hard earned cash and make them wealthy by purchasing their product.
Many people, when they purchase a new consumer good, will get a sense of satisfaction from the release of dopamine in their mind. It's a fleeting satisfaction that is similar to an addiction and will not provide long term wealth or freedom. Let's take a vehicle for an example. A thirty thousand dollar, brand new vehicle. Let's say that the dealer wants a one thousand dollar down payment on the vehicle. You can go buy that vehicle and in one year that vehicle will still be the same vehicle, but its value will have dropped to twenty thousand dollars. So what happened to your thousand dollar down payment? What kind of return did you see on that thousand dollars? You may think about savings accounts, at half a percent return, or stocks and bonds at four percent returns. You may think six percent is a decent return. Compare that to the vehicle, you just made a negative one thousand percent return in one year by purchasing it.
This is the consumer mindset that is taught to us from childhood by the advertisers and the developers, keeping the consumer poor. To Become an investor you have to think like an investor, and that means everything in life changes when it comes to where your money is placed. Instead of deriving pleasure from shiny new consumer goods, you would be deriving pleasure from purchasing assets that make you more wealthy into the future. And if you do come into a situation where you must buy an item that is going to depreciate or lose value over time; do not use leverage (debt), and never buy new.
There are many Internet and app services to buy used consumer goods, and it's hard to believe, but you could immediately start saving ten to twenty thousand dollars per year simply by purchasing on the used market. If a consumer goods product is three or four years old, there's a good chance that you can resell it in five years for the same price that you paid for it and lose none of your equity. That's thinking like an investor.
When we talk about debt, debt used to purchase a new vehicle is one of the worst things that one can do because you are leveraging your money downwards. Another common misconception are houses, personal homes. Some people call these assets. I call them a liability, and here's why. An asset makes you money and makes you wealthier every month. A personal residence, is nothing more than a savings account. Yes it's better to put your money in a savings account than it is to pay it to the landlord or leverage it on consumer goods. But ultimately, owning real estate that does not cash flow, can not help you much in the long term.
Only spend your money on items that are going to cashflow today, and appreciate tomorrow - to make you wealthier in the future. If an item doesn't create wealth in the future, buy it used at the lowest discount rate you can, save your money for something you can invest in. This is the only way to create true freedom, exit the work treadmill, and retire at an early age.
Anyone can enjoy life, see the world, spend more time with family, friends, and loved ones, by changing their financial mindset.
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