Thursday, December 08, 2005

Are You Rich or Are you Poor?

Are you Rich? Or Are you Poor?
By Kathleen Mary Andersen
reprinted from Opinion Magazine
Are you rich or are you poor? That is how the world sometimes categorizes us. "Rich", according the dictionary says: "having an abundant supply of desirable qualities or substances". I admit I have an abundant supply of good friends. I also have an abundant supply of plants. That makes me rich with friends, and rich with plants. Obviously, these things don't pay the rent at the end of the day as the saying goes. When it comes to dollars and cents I consider myself not "wealthy". I am a person, like most who must take that pile of bills every month and figure out how to pay them. And lately this requires not just logic but a bit of magic. No, make that a lot of magic. Better yet, call me a certified magician.It seems like most of us were more flush with cash in the 80s but the introduction of the 90s took away that cushion. We can attribute it to losses in the stock market, higher prices or fewer quality jobs. I make what is an average income. I am primarily a mortgage broker. I took a test recently that said I fall into the .779% of the world's richest people and that there are 5,953,222,435 people poorer than me. This looks wonderful on paper but is it a reality of every day life? No! The statistics are just figures that can be juggled to represent whatever we want to believe them to be. The people count clock says there are approximately 6.4 billion people on the planet. It sure makes me think I am up there with the richest. However, I would be missing the reality of rich and poor if I was to believe these numbers.
First of all, I don't live in the entire world; I live in the United States. So I must look at rich and poor, here, not Sweden, nor India nor Saudi Arabia. Ten years ago, I had a more pocket money than I do now, even though my income was considerably less. Simple math. More pay, less money. Obviously the answer to the mystery is in the cost of living. Being a mortgage broker I get to see a cross section of people's every day money life. I've been doing this for 14 years. Although I don't have all the statistics of everyone buying or owning a house in the United States, my information does represent a cross section of finances in the United States. So where does our money go? Food. Love it or hate it, we all need it. It's mandatory. According to statistics, if will believe them, food prices have only increased 2.5% per year since 1998 and is expected to continue at that rate until 2007. Funny, my grocery bill has tripled just in the past couple of years. Does anyone notice that there is hardly anything in the store under a dollar these days? What ever happened to the twenty-five cent candy bar? The statistics continue to say, 19% of our grocery budget goes to meats/poultry/fish. Beef with the least increase in pricing. A couple of years ago, beef sales were down, the beef industry had to resort to television advertising. If I remember it ended with "eat beef". Beef sales were down because of fears of mad cow disease, health warnings about high cholesterol and heart disease. The ironic part is that now that America is obsessed with low carbohydrate eating which promotes beef and chicken, we hardly see those warnings. Yes, now its good fat, bad fat, inherited fat. So bread is out and beef is in. Maybe we will again see those old Wonder Bread commercials -- "Fortified with iron and other important minerals". 15% of our budget goes to vegetables/grains. What this tells me is that buying carrots and lettuce is almost as much as buying a steak and if you have been to the grocery store lately, that's about how it goes. Let's not even compare it to a box of cereal. I think realistically I can buy a steak cheaper than a box of corn flakes if I am to match package weight to package weight. The statistics also say that 47% of our food expenditures is on the outside of the house, not the inside. Meaning we spend almost half our food budget on eating out. This is hard to believe unless you take into consideration that most people work and that they eat their lunch at some type of restaurant or takeout.
That sounds decadent but it really isn't. Are we really out there dining on escargotand filet mignon? No, we are probably out ordering our $6.95 sandwich and chips from Subway or a Big Mac from McDonalds, if we are lucky to call that dining out. Are we really spending almost half our food budget eating out or are these statistics not matching up? I am having trouble with the math. Half our budget to eating out, restaurant business across the country is down. "Show me the money" (bold) as the saying goes. I know that my electric and gas bills have doubled over the past couple of years. Yes, we've all heard the story about how Enron forced electric prices up but I am not talking solely about my electric bill. You can believe some people that utilities are still "cheap" but cheap in comparison to what, not having any at all? My basic phone bill is $66.98 per month. What I actually have to pay the phone company is $105.54 a month once I get done with "network access, local number portability, taxes, interstate" this and that.
The mathematical genius in me says 36% of my bill goes to taxes not service. We don't complain or try to change it, so I guess each month more taxes will be added until the American public starts thinking about what the ratio of taxation was at the time the colonist threw tea into Boston Harbor. It was far less than we pay in taxes now. Our assets. (Bold) What assets? What have I seen in the cross section of assets? Since 1990, I have not seen a large rise in wages on the average person. But I have seen credit card debt not only increase but quadruple since then. A $4,000 average credit card is now more in the neighborhood of $12,000. "Ca-ching", the banks love it. Have you seen those catchy little ads on television? Especially ones pushing "0%" interest. Does anyone know what "0%" interest is? There isn't really "0%" interest. Having worked at a bank, I can tell you there is no such thing as free anything in the banking business.
Or any business for that matter. Simple logic, banks make money. Plenty of money. Interest makes banks rich. Interest makes you, the consumer,poor. Automobiles now carry 7 year mortgages. Banks love those longer term interest payments. And savings? What savings? Who has a savings account anymore? The days of the bank paying you interest for your savings has now become, you pay the bank a service charge to "maintain" your savings. Pricing Index. (Bold) This is the statistic that basically looks at consumer goods and compares how prices have changed over the past 10 years. It's what they tag "inflationary figures". What the statistics don't say is that the objects used in this report are things like refrigerators, stoves, washing machines, automobiles and televisions. Well I don't buy a refrigerator, a stove or a television every year. I don't buy a telephone every year, I buy the service, I don't buy the car, I buy the gas that runs it, I don't buy the light bulbs, I buy the electricity that takes to power it and that is not included in the statistics that tell us what inflation is. And I pay for those things on not only a monthly but a daily basis.
What I am seeing is that the price of necessities for living has increased far more than 3% each year. Purchasing power over the past 5 years is not measured as it used to be and therefore not an accurate indicator of what real life and expenses are about. Credit Cards. (Bold) Going back to credit cards, I have done a poll of my customers to see what they buy with their credit cards. Are they in the mall buying the latest in purses, shoes, ties, or jewelry? No. Sadly I am seeing that people are using their credit cards to make payments on their utilities, their automobiles and yes, even their mortgages. Simple logic. The sale of consumer goods only increase "x" amount while credit card debt increases triple that amount. No brain surgery needed, credit card debt is being used for something other than durable goods.
It's often being used to survive. It's starting to make sense. Reading between the lines is paying off. Do I need a fancy poll to tell me about where my money goes? No, I have to simply open my checkbook to see how much it really cost to live and unfortunately my position in the worlds richest seems to be nothing more than a distorted statistic to make me feel better. I am rich in my life experiences, I am rich in my family and friends and I am rich with a lot of good fortune. That is what rich and poor should be judged on. Not how big your bank account is, but who you are as a person. We should start a poll on how rich we are in kindness, forgiveness and honesty. I am basically a happy person and I am told to be happy is worth all the riches in the world. As the songs go, "money can't buy you happiness", or can it. Do rich people really have as many problems as poor people or is this some hype we receive so we don't feel bad when we have no money. Whether we want to agree or not agree, I think money or lack of it, is attached to how we are judged as a person in the general public. Until we start educating our children about self worth, not your pocketbook, things will always be the same.

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