Wealth, Homeownership, Today's American Dream: Perhaps Not What You Think

There’s been a lot of talk in recent years that “the American Dream is dying.” It might appear to be a bold statement, but considering how intangible and loose the idea of the American Dream is, it’s actually quite an easy assertion to make and then defend however one sees fit. Is owning your own home instead of living on a lease agreement the American Dream? Homeownership is down, so does that mean the American Dream is dying? Or maybe the American Dream is the promise that anyone can earn decent money and live how they choose? Non-college-educated men have seen their income drop 31% in the last twenty years, so maybe that’s how the American Dream is dying.

But at its most basic level, the American Dream is simply an idea: you can get rich, if you’re lucky or smart or hard-working.

Unfortunately, the luck element is pretty dominant in the American psyche. People see American Idol or America’s Got Talent and think “I could be a superstar, if my brilliance only got discovered!” In fact, a full 31% of Americans back in 2003 thought they would one day be rich (never mind that only 2% actually described themselves as rich). Gallup hasn’t released a similar poll since, but it seems unlikely that 31% in today’s economy believe they’ll be rich one day, with so many people believing that we’re in a recession (even though we’re not, technically speaking).

Perhaps a surprisingly good pulse is the measurement of “intergenerational earnings elasticity,” which is the likelihood that your offspring will earn more than you. America is dropping in this measure, which is a bad sign for where we’re headed in the long term.

But before digging deeper into how one gets rich, how do we define rich? A recent poll of millionaires put the figure at $7.5 million in net worth. A poll of the average citizen said an annual income of $122,000 would be rich, but the fact is that isn’t going to go very far in expensive areas like Manhattan, Washington DC, or San Francisco, where a four bedroom lease agreement will likely cost you $4,000 and up each month.

If $7.5M is your goal, you’re in for a tough track. If you want to take the traditional route, by becoming a salaried businessman, or doctor, or lawyer, you’d really have to make more than $1M/year, and eventually you might build assets of $7.5M. Reality check: only 0.3% of households earn more than $1M/year.

Perhaps you’d prefer the stocks/securities route. Here’s how the math breaks down: if you earn the median household income of roughly $43,000, and invest 5% of your income in the market every year, even with a 2% yearly wage increase and an average return of 8% on your investments, it will take 50 years just to reach one million dollars, much less 7.5 of them.

And here’s a scary thought: from 1970-2007, there was upward pressure from credit creation, as individuals, companies, and governments fueled growth through borrowing, which artificially boosted stock markets and real estate markets alike. After the Great Recession, we’re just now starting to see the long-term pain we as a society are in for, as we shrink spending and pay off debts. The second scary thought is that population growth is the primary way economies grow, but there’s increasing speculation that within the next 15 years, the world’s population will likely start shrinking, due to low birth rates.

Where’s the good news in all this?

The good news is that there are two avenues to wealth that can actually get you there: starting a business and investing in real estate. Both share a lot in common, from strong tax incentives to up-front investment of time and capital to leveragability to the ability to eventually hire employees who will end up doing the work for you. Borrow the money, and start investing in yourself by creating assets. Buy real estate at a discount, sign a lease agreement on it, and let your tenants pay off your mortgage. Offer a service that’s starting to catch on in Manhattan but no one offers yet in your city. Hire an assistant to start doing the work that you’re least likely to do yourself but that needs to be done.

Of course, none of this really matters, because most Americans don’t actually WANT to go through the process of getting rich. How many Caribbean vacations do you think entrepreneurs and nascent real estate investors go on, when they’re trying to get their business off the ground? How often do you think they call in sick, or leave work early for the day to hit happy hour? They don’t. More often, they’re working weekends, they’re missing their children’s birthdays, and otherwise making sacrifices because they’re driven to succeed, and to get rich. Most of us aren’t willing to do so, which means most of us won’t ever be rich – and most of us are, deep down, all right with that fact.

Brian Davis is a rental industry expert who contributes finance & real estate articles to Nuwire Investor, WannaNetwork, REIClub, and EZ Landlord Forms, an online hub for free rental application and lease agreement forms.

Article Source: http://www.positivearticles.com. PositiveArticles.Com does not vouch for or necessarily endorse the contents of this article.

If you are copying this article for publishing on a website or ezine, please use the "Ezine Ready" button from the righthand menu.

Article Search

Home

	Print This Article
	Add To Favorites
	Ezine Ready