Is the American Dream Dead? I hope so!

If you had asked any random American in the spring of 2008 how they defined the “American Dream,” you would probably hear something to the effect of owning a house with a white picket fence, a few children running around the yard with a dog, and a BMW for him and a Honda Odyssey for her parked in the driveway. Fast forward a few years to the summer of 2011 and that same person may have a slightly different answer. It’s not that people don’t want the same types of things as they did prior to the recent downturn in the economy, it’s just that the thick veil of unreality that had clouded the eyes of millions of Americans for years suddenly became a little bit thinner.

For tens of thousands, the American Dream was achieved not by years of conservative spending habits and prudent investing, but rather a no-limits bared consumption lifestyle fueled by easy credit and people’s unwillingness to use the word “no” to stuff. “Should I buy a 3rd pair of shoes this month even though I have 5 like them at home?” Yes! “Should I buy a new Ford F-250 truck even though I’m not a contractor and I commute 35-minutes to downtown each day?” Sure! “Should I take out a HELOC to fund that $50,000 gourmet kitchen I’ve always dreamed of despite the fact that 99% of my cooking involves the microwave?” Of course I should! “Should I buy this home that’s 3 times larger than I need, with no money down and an adjustable mortgage due to adjust in 36 months?” Absolutely!

These examples may be comical to a degree but a quick step back a few years and that was reality for many people. “Let the good times roll” was the prevailing attitude for the masses and the result was the inevitable crash we all had the privilege to walk through. As our glass-house perceptions of reality came crashing down all around us, we adamantly cried “never again, I’ll do it differently next time.” Fiscal responsibility chatter started flooding in from the white houses of Main Street to the slightly larger White House on 1600 Pennsylvania Avenue. At last, everyone seemed to be reading the Tortoise and the Hare again and desiring to morph their lives to resemble that of the Tortoise.

Though the mess isn’t over for everyone yet, there are enough positive changes from the job and stock markets alike to see that a recovery is in progress. Life is returning to what many people would call normality;  in doing so, I wonder if all those people who begged to become the Tortoise, if given the 2nd chance, are doing so? I’m curious what lessons have really been learned during the down times? Have behaviors really changed? Do we really intend to be more watchful of our spending habits? Have our investment strategies sincerely become more conservative? Have the methods for obtaining the American Dream, at least the pre-recession versions, really died? I hope so for all of our sake. Otherwise, we’ll be right back in this position within a decade if not sooner.

Making Every Penny Stretch

Our money is being stretched in multiple directions every day. Someone, somewhere wants that dollar that is in our back pocket or purse. The laundromat, the hair-stylist, the grocery store, the mechanic, the barista at our regular coffee stand, and of course, don’t forget the government. All want to lay claim to that green bill, that piece of legal tender just waiting leave our wallet and find its way into a cashiers till. With all those hands out wanting a piece of our hard earned money it can be difficult to find enough of it to go around. And while it might be tempting to consider just cutting a few people out (that 25% to the government would be a fun place to start), the legal ramifications typically help persuade us to use a different method for managing our money.

What we need is a plan. I know what you’re thinking, “not the dreaded budget”. You can call it something else if it lowers your pulse a bit, but a plan is what the doctor ordered for your money. A spending plan for your money is want will help insure that each bill gets paid to the right person, at the right time, for the right amount. Wow, that was so profound. Hahaha. I know, but beyond the basics, a plan will also help you reach those goals you have jotted down somewhere (including the ones that jotted down in the back of your mind, like retirement and/or funding your kids college one day). A plan will assist you in saying yes to the items that must be dealt with (the home mortgage) and no to the items of less importance (that magic set that will fulfill your childhood dreams of becoming the great Houdini) during tight months.

A plan will help simplify your personal financial world. Get your money matters down on writing and put it somewhere that you’re going to see it several times a week. Repeat this step every month so that each dollar that comes in has to a home to go before the month is over. And here’s another novel idea, when there’s a little extra some month, start building up that emergency savings account! No really, it’ll pay big rewards when a future month is tighter than expected. Living on a financial plan doesn’t have to be a big, scary ordeal, but it needs to happen if you want to be successful long-term with your money.