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Scaling Down is the New Rich!

Updated: Dec 16, 2021

I was watching a video on building my own tiny house the other day.

Yes, it is my goal to retire in a tiny home, on a lake, with my wife, a dog, and as little stuff as humanly possible. Why do we need “stuff” anyway, right? Imagine how much more fulfilling life would be if we weren’t slaves to the American dream...

The American dream for many of us has become tied to our ability to have a nice car(s), spacious home(s), great vacation(s), a comfortable living (the ability to buy more stuff), and to make sure that in all our getting others are aware that we got it.

Ask yourself: Are you really buying that car or purchasing that home because you want it? Or do you have a burning desire to signal to others that you’ve arrived? Maybe your self-worth is tethered to all the compliments and attention? Regardless, we all have our reasons for choosing to partake in the rat race of life. The American dream is incredibly elusive. According to a 2019 study by Ameriprise, only 13% of the millionaires polled felt rich. T.I. (Tip Harris) even mentions in his song On Top of the World...“ Remember sayin’ damn if I could just get to a million-plus / And now I’m like s#@! what the f@$% is a million bucks.” I know what you are thinking. You would still like to have a million bucks. You want those problems. You'll relish in that smoke - LOL! Money gives you options. However, if money gives you options, do you ever get to a point where you can opt-out? When is enough, well, enough? There will always be a new toy or the latest and greatest thing that you've been told you have to have. When does it ever stop?

It doesn't. There is no end to more. Think about it this way. What if you could condition yourself to want less? For instance, instead of entering into a car loan every 3 to 5 years, what would become of your savings by keeping the same car for 15 years? I have, roughly. Panda (my car) and I have been in a committed relationship for 14 years. Let’s do the math. Based on some data pulled from Credit Karma, the average car note for a new car is $568. So, let’s say you pay off the car in 5 years and save $568 every month over the next 10 years. That would amount to $68,160 in savings (And that’s without investing the money). If you invested this money and yielded a conservative return of 6% over that same period, you would have $93,000. Wait there's more!

The average annual rate of return yielded by the S&P 500 from 2010 to 2020 was 13.6%. Under this scenario, your savings would amount to $143,662. Boom!!!

Now, how much could you save if you did this for two car payments? Or Three? Basically, you would be in a position to pay cash for a home. And, depending on where you live, you would be in a position to acquire a revenue-generating rental property or two. That's a win-win if you ask me. Not only would you have the freedom that comes with not paying a car note or a mortgage, but you would also be in a position to take ownership of your life. For instance, you'd have the type of freedom to walk away from a job you hate that pays you just enough to impress people you don't like. You'd feel empowered to speak up and out about social ills and injustice without fearing the consequences of doing what's right. You could take chances, fail, take more chances, fail, take more chances and fail again, knowing that you are financially secure and can endure living comfortably on a modest income.

How many people can say that they can do this? Unfortunately, many rich people can't either. The next time you hear the old biblical saying that the borrower is a slave to the lender, it could also be argued that chasing the elusive ideals of the American dream induces a perpetual state of borrowing that one cannot escape.

So, which comes first: debt or the American dream? You know where I stand. -Until next time. You have more power than you think. Own it!-

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