How to Avoid the FALSE PROMISE of the Madison Avenue Lifestyle
The Madison Ave lifestyle is everywhere we look. You know what I'm talking about…Fast paced… Beautiful houses, beautiful new cars, two new motorcycles in the garage, a hot tub next to the swimming pool, fancy restaurants every night… Everything you ever desire right there at your beck and call. Advertisers are experts at tapping into our dreams of having the ability to live like this. (The glamor of a shiny new car on wet pavement at night is a sure sell.) but there is one group of advertisers that is especially good at making us believe that the Madison Ave. lifestyle is attainable by everyone of us… The credit card companies.
Let's look at just a few of their advertisements. There is a major credit card that you are all familiar with. Their tv ad slogan? “It's everywhere you want to be!” And it usually shows people who are traveling the world, enjoying everything that life (with credit cards) has to offer. Now what is this company trying to say here? They are trying to make you believe that this credit card will take you anywhere and everywhere you want to go in life.
I just received a pre-approved credit card application in the mail. The headline said “get the credit you deserve!” Makes you feel great doesn't it? …To know that you deserve something. It makes you want to stand up and fight – because it implies that right now you're not getting what you deserve. After all, credit is a constitutional right, isn't it?
Here is an excerpt from another one that I got in the mail just the other day. Part of the sales letter said: “only a select group of people will ever carry the gold card. It instantly identifies you as someone special – one who has earned a superior degree of financial freedom (emphasis added) – and one who expects higher levels of financial flexibility, convenience and service in all your dealings.”
Sounds great, doesn't it? Especially the part about financial freedom. After all, isn't financial freedom what we all desire?
All of these ad campaigns are built around one premise: “You can achieve a better lifestyle by using credit than you can by spending cash.”
There is a problem here…. This premise is a lie!
Here is the reality: you can live better for a few years by using credit, but then you will spend the rest of your life living below your means trying to pay it all back. It's all an illusion.
Credit makes you believe that you are well off (or at least doing pretty well) because you have all these “things.” But here are the facts: if you make a $2,000 credit card purchase at 19.8% and make only the minimum payments, it will take you 31 years to pay it off and you will pay $8,202 in interest! That means that by using credit, you are paying five times as much as if you used cash.
Go ahead. Buy all those nice things on credit, and I will use only cash. Let's see what happens. At first, you will have a nice car or two, a nice boat, nice furniture, and great stereo, etc. And I will drive older cars. I will have “early American garage sale” furniture and clothes. And I will probably deprive myself of that motorcycle that I would really love to have, because I don't have the cash to buy it.
By all appearances, it will look like you are much more successful than I am…At first. But what is really happening here? In a few years I will not only catch up to you, but pass you by and leave you in the dust financially. That is because, when you paid $10,000 for a $2,000 purchase using your credit card, I saved until I had the $2,000 to pay cash for it. Then I was able to invest the extra $8,000 that you spent on interest. You had compound interest working against you, but I had compound interest working for me! (And that's where you want to be!)
ten or twenty years down the road, you will be up to your earlobes in debt, still trying to live the illusive Madison Ave lifestyle. But I will be driving 4 or 5 year old cars instead of new ones, while I quietly watch my investment portfolio grow into the millions – literally!
By then, I will be working because I want to, not because I have to. And I will be able to afford to buy just about anything I want…Cash! …While you're sweating out the economy and the next downsizing or looking for that next $50 pay raise – just so you can stay on top of all those credit card payments you're making for things that you bought years ago and have probably forgotten all about by now anyway.
Are you beginning to get the picture? Credit does you no good. It promises (and delivers) short term gains. But it always brings long term pain. By chasing the Madison Ave lifestyle using credit, you are actually getting further away from it. Wealthy people understand this principle. That's why they're wealthy. There is a fascinating book called “The Millionaire Next Door,” written by Thomas Stanley and William Danko. (Published by pocket books, a division of Simon & Schuster inc.) the authors spent many years interviewing the affluent. (Those with a net worth between $1-5 million.) and some very interesting things have emerged from their study.
Let's look at the automobile purchasing habits of the affluent. What type of car would you expect a millionaire to drive? An expensive, luxury car, or a hot, foreign sports car? Well, Stanley & Danko have found that this is not at all the case. They have found that the most popular make driven by the affluent is ford. And the most popular models are f-150 pickups and explorers!
Here's what Stanley and Danko have to say: “How do millionaires go about acquiring vehicles? About 81 % percent purchase their vehicles. The balance lease. Only 23.5 percent of millionaires own new cars. Most have not purchased a car in the last two years. In fact, 25.2 percent have not purchased a motor vehicle in four or more years. How much do millionaires pay for these vehicles? The typical millionaire (those in the 50th percentile) paid $24,800 for his most recent acquisition. Note that 30 percent spent $19,500 or less.
Also note that the average American buyer of a new motor vehicle paid more than $21,000 for his most recent acquisition. This is not much less than the $24,800 paid by millionaires! Moreover, not all of these millionaires purchased new vehicles. How many indicated that their most recent vehicles was used? Nearly 37 percent. In addition, many millionaires indicated that they traded down recently – that is, purchased lower-priced vehicles than they had before.” (Pp.112-113)
in other words, millionaires drive average vehicles! Why do they drive average, older cars instead of brand new, luxury cars?
1. They're rich *because* they drive older, average cars, and they know that if they purchased new luxury cars all the time, they wouldn't be rich.
2. They don't feel that they have to maintain a status symbol or “keep up with the Joneses” because they know that they are worth much more than the Joneses could even dream of.
My wife recently spoke with a mechanic who had a dream of buying his own facility for his car repair business. But, for him, it was just a dream. He could never afford it. Yet, in his driveway sat a beautiful, brand new, turbo charged, diesel 4×4 pickup truck with king cab and etc., etc. In fact, he even joked about the “mortgage” on his truck. But what he didn't realize was that if he hadn't bought into the allure of that beautiful new pickup truck, he could have purchased his garage and owned his own business.
If he had driven an older truck and purchased his own business instead, he would have eventually had the freedom to be able to drive whatever he wanted! Reaching for the allure of the Madison Ave lifestyle was keeping him from attaining the Madison Ave lifestyle!
To live the Madison Avenue lifestyle, you must first avoid the Madison Avenue lifestyle. Don't spend $10,000 for a $2,000 purchase because you bought it using a credit card! Instead, save $2,000, buy it cash, and invest the $8,000. Eliminate all you debt – including your mortgage – and then invest the money that you are now wasting by paying interest.
If you do that consistently, you will have compound interest working for you instead of against you, and twenty years from now you will find that you have a new address on Madison Avenue!