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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 pace… Beautiful homes, beautiful new cars, two new motorcycles in the garage, hot tub by the pool, fancy restaurants every night… Everything you could ever want right there at your beck and call . Advertisers are experts at making our dreams of living like this come true. (The allure of a shiny new car on wet pavement at night certainly sells.) but there’s one group of advertisers who are particularly good at making us believe that the lifestyle of Madison Ave. is attainable for all of us.. credit card companies.
Let’s look at just a few of their ads. There is a major credit card that you all know. Their advertising slogan on TV? “It’s everywhere you want to be!” And it usually shows people traveling the world enjoying all that life (with credit cards) has to offer. What is this company trying to say here? They are trying to make you believe that this credit card will get you anywhere and everywhere you want to go in life.
I just received a pre-approved credit card application in the mail. The headline read “get the credit you deserve!” You feel great, don’t you? …Know that you deserve something. It makes you want to stand up and fight—because it means you’re not getting what you deserve right now. After all, credit is a constitutional right, right?
Here’s an excerpt from another I recently received in the mail. Part of the sales letter stated, “Only a select group of people will ever have a Gold Card. It immediately identifies you as someone special – someone who has earned a higher level of financial freedom (emphasis added) – and someone who expects higher standards. financial flexibility, convenience and service in all your dealings.”
Sounds great, right? Especially the part about financial freedom. After all, isn’t financial freedom what we all desire?
All of these advertising campaigns are based on a single premise: “You can achieve a better lifestyle by using credit than by spending cash.”
Here’s the problem…. This assumption is a lie!
Here’s the reality: you can live better for a few years if you use credit, but then you’ll spend the rest of your life below your means trying to pay it all off. It’s all an illusion.
Credit makes you believe that you are doing well (or at least doing pretty well) because you have all this “stuff”. But here are the facts: if you make a $2,000 credit card purchase at 19.8% and only make the minimum payments, it will take you 31 years to pay it off and you’ll pay $8,202 in interest! This means that using credit you will pay five times as much as if you used cash.
Go ahead. Buy all the nice things on credit and I’ll only use cash. Let’s see what happens. At first you will have a nice car or two, a nice boat, nice furniture and a great stereo, etc. And I will drive older cars. I will have “early American garage sale” furniture and clothing. And I’m probably going to be poor for that bike I’d really like to have because I don’t have the cash to buy it.
By all accounts, it will appear that you are much more successful than I am…At first. But what is really going on here? In a few years I will not only catch up with you, but pass you and leave you in the dust financially. This is because when you paid $10,000 for a $2,000 purchase with your credit card, I saved until I had $2,000 to pay in cash. Then I could have invested the extra $8,000 that you spent in interest. You had compound interest working against you, but I had compound interest working for me! (And that’s where you want to be!)
in ten or twenty years you’ll be up to your earlobes in debt and still trying to live the illusory Madison Ave lifestyle. But I’ll be driving 4 or 5 year old cars instead of new while quietly watching my investment portfolio grow into the millions – literally!
Until then, I will work because I want to, not because I have to. And I’ll be able to afford to buy anything I want… Cash! …While you’re sweating the economy and more downsizing or looking for another $50 raise – just to keep track of all those credit card payments you’re making for things you bought years ago and have probably forgotten all about.
Are you starting to get the picture? Credit is not good for you. It promises (and delivers) short-term profits. But it always brings long-term pain. By chasing the Madison Ave lifestyle with credit, you are actually moving away from it. Rich people understand this principle. That’s why they are rich. 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 have spent many years interviewing the wealthy. (Those with a net worth between $1-5 million.) and some very interesting things emerged from their study.
Let’s look at the shopping habits of rich people. What type of car would you expect a millionaire to drive? An expensive luxury car or a hot foreign sports car? Stanley and Danko discovered that this was not the case at all. They found that the most popular brand driven by the wealthy is Ford. And the most popular models are F-150 pickups and explorers!
Stanley and Danko say, “How do millionaires go about acquiring vehicles? About 81% percent buy their vehicles. The balance leases. Only 23.5 percent of millionaires own new cars. Most of them haven’t bought a car in the last two years. . In fact, 25 .2 percent haven’t bought a motor vehicle in four or more years. How much do millionaires pay for these vehicles? The typical millionaire (in the 50th percentile) paid $24,800 for their 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 their most recent acquisition. That’s not much less than the $24,800 paid by millionaires! Moreover, not all of these millionaires bought new vehicles. How many of them said their newest vehicles were used? Almost 37 percent. Additionally, many millionaires reported that they recently traded down—that is, they bought vehicles at a lower price than they previously had.” (pp. 112-113)
in other words, millionaires drive average vehicles! Why do they drive average, older cars instead of brand new, luxury ones?
1. They are rich *because* they drive older average cars and know that if they kept buying new luxury cars they wouldn’t be rich.
2. They don’t feel like they have to maintain a status symbol or “keep up with the Joneses” because they know they are worth much more than the Joneses could ever imagine.
My wife recently spoke with a mechanic who had a dream of buying his own equipment for his auto repair shop. But it was just a dream for him. He could never afford it. Yet there was a beautiful, brand new, turbocharged, diesel 4×4 pickup with a King cab sitting in his driveway, 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 charm of that beautiful new pickup truck, he could have bought a garage and owned his own business.
If he drove an older truck and bought his own business instead, he would finally have the freedom to drive whatever he wanted! Achieving the appeal of the Madison Ave lifestyle was preventing him from achieving the Madison Ave lifestyle!
If you want to live the Madison Avenue lifestyle, you must first avoid the Madison Avenue lifestyle. Don’t spend $10,000 on a $2,000 purchase because you bought it with a credit card! Instead, you save $2,000, buy it in cash and invest $8,000. Eliminate all your debt – including your mortgage – and then invest the money you’re now wasting paying interest.
If you do this consistently, compound interest will work for you instead of against you, and in twenty years you’ll find yourself with a new address on Madison Avenue!
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