What's the difference between very rich people and everyone else? According to an oft-quoted droll comment, perhaps erroneously attributed to Ernest Hemingway, the rich have more money.
The problem is that the not-so-rich seem to have picked up most of the basic lifestyle habits of the rich, except for one crucial difference. Rich people spend a ton of money on stuff and give a lot of money to charity, but they manage to hang on to the majority of their wealth; regular folks spend a ton of money on stuff and give a lot of money to charity, but don't have so much as a pincushion of pennies stashed away, even for an emergency.
In fact, for most people, one of the tragic side effects of accumulating too much stuff is not accumulating enough cash to help get through a financial crisis. How can you save any money when you're busy spending it on all that stuff?
It doesn't take much to push the average American over the edge financially because most are so woefully lacking savings. The Association of Credit and Collection Professionals found that the number of personal bankruptcies tripled between 1986 and 2004. (Remember the '80's? "Gold. I'm worth it." "L'Oreal. I'm worth it." "Greed is good." Gordon Gekko in Wall Street, written by Stanley Weiser and Oliver Stone) According to CNN Money.com, personal bankruptcies hit an all time high in 2005 with an increase of 31.6%. People filed in a mad rush to get in prior to the October deadline date, after which a new law passed by Congress would make it a much more difficult process. California, always at the forefront of national trends, led the way, as usual, with an increase in filings of 36%.
There are many reasons that people go bankrupt. A 2005 bulletin from AARP states that nearly half of the personal bankruptcies filed each year are the result of medical expenses. But there are other factors at work, too. Bankruptcy Reader cites a list that includes:
(1) credit that is too easy to get (how many unsolicited credit card offers have you had lately?);
(2) lack of health insurance to handle a major medical crisis;
(3) a housing market boom due to low interest rates that led many people to use adjustable rate loans to purchase properties they really couldn't afford;
(4) student loans and debt (at least you're paying for something of value rather than disposable goods that you've already used up);
(6) more frequent corporate restructuring leading to job loss;
(7) but most importantly, the habit of living paycheck to paycheck.
The report states, "The average American has no savings, overspends on a monthly basis, and owns materialistic items that are not needed to survive." And we know that the majority of those materialistic items are clutter.
So your clutter is not only making you uncomfortable by overcrowding your home, it's also caused you to risk your financial security and that of your family because you "paid good money for it." ("But I paid good money for it," is a frequent, unacceptable excuse to hang on to useless stuff.) It's too late now to undo past decisions, but it's not too late to make better choices in the future, like saving some money instead of spending it all on unnecessary stuff. And it's not too late to let go of all those things you've accumulated that you know you don't need.
As for the rich, well, it turns out that they actually have a problem with money that's similar to some people's problem with stuff: they hoard it. Ironically, while bankruptcies have been mounting steadily for a couple of decades, Gregg Easterbrook wrote in the LA Times, "Income for the top 1% of Americans has more than doubled in the last quarter of a century, while that of the bottom fifth barely budged. The rich, in short, are getting steadily richer, both in absolute terms and compared with the rest of society." In fact, for the first time ever, all 400 people on the Forbes list of the ultra-rich are billionaires.
These extremely wealthy people are very generous, making staggeringly large contributions to worthy causes. But in terms of their net worth, all but a few are giving away only about 1% of their assets. (A rough estimate by the Urban Institute based on 2004 tax returns shows that "regular people" give approximately 2.3% of their income.) This means that these rich folks still have so much money that it would truly be impossible to spend it all on any personal possessions that could be meaningful, not to mention necessary.
Isn't there something off-kilter about this? In a related opinion article, Peter Singer, professor of bioethics at Princeton University, thinks so and comments, "In a world in which more than a billion people struggle to survive on the purchasing-power equivalent of less than $1 a day, there has to be a serious moral doubt about whether anyone should be a billionaire . . . come to think of it, we all spend money on luxurious, frivolous or unnecessary items when we could be giving it to organizations such as Oxfam America that will use it to fight global poverty."
We are so fortunate to live in a country that allows us the opportunity to accumulate individual wealth. Shouldn't we think more carefully about how we use that opportunity? We don't need to embrace the ascetic life of a monk or take a vow of poverty, but just once in awhile can't we pass on the double de-caf latte, maybe skip updating the wardrobe this season, and forget about trading up to a fancier car when the one we have runs just fine? Let's take that money that we would have spent, save a nice size chunk of it and give the rest to a charity that we believe in. That way, we can start to accumulate or add to a much-needed nest egg to protect ourselves and our families for the future and we can help others in need so that they have a future. Win/win situation, I'd say.
And if all those gazillionaires ever figure out that they don't need to hang onto most of their money any more than the rest of us need to hang on to most of our stuff, the world could turn into a pretty great place for all its inhabitants.
(c) 2007 Cynthia Friedlob