After writing yesterday’s post about the True Cost of a Car, I took a look down and saw my cell phone. I thought about how much a cell phone really costs, in the context of financial freedom.
A $45,000 Cell Phone
How much does a cell phone really cost? How much do you pay? For a cool phone like an iPhone, it costs $299 for the phone, plus $36 for an activation fee. Then, it costs about $110 per month for calls, data and text. Add taxes and other fees and it comes out to about $135 per month. Divide the startup costs by 24 (months), and the average monthly cost is $150.
This article on Yahoo finance really got my attention. It’s about how the state of Connecticut is about to run out of money. It’s interesting because many states are in dire financial straits, but most people are, as usual, blissfully unaware.
Recently I did some research about bonds, and was interested in purchasing some. I discovered that municipal funds are supposed to be among the safest bonds that you can buy! I thought, “Isn’t that funny. Many states and cities are going bankrupt, but people think these bonds are very safe.” It sounds like the same game the ratings companies have been playing for decades: give the bond a AAA rating even if it is risky.
Why are municipal bonds more risky in this financial environment?
Thanks to Robert, I found a great new resource about America’s precarious financial situation and the future financial chaos. It is a movie called I.O.U.S.A. What better way to learn about economics than through a video?
Curiously, embedding the movie is disabled, so here is the preview instead:
After reading this article on Yahoo about the ever-growing national debt, I took a look at the U.S. National Debt Clock. Not only are we having record deficits each year, but the debt per American has reached unsustainable levels.
As you can see, the debt has reached $42,698 per American! And, $119,524 per taxpayer. The average savings in America is a small percentage of these figures.
On of the reasons that our economy is in a precarious position is that it is composed mostly of spending. Specifically, it is created by the desire to consume ever greater amounts of newer and bigger stuff. And we don’t need most of that stuff.
The American Dream
Contrary to popular opinion, most people only spend about 30% of their money on things that they really need. People don’t need a cell phone. They don’t need new clothes or to go out to eat. They can survive just fine on cheap food like pasta or rice or vegetables.
The challenge is that we grow up thinking that if we can buy just one more thing then we will be happy. And the problem is exacerbated by easy financing. The cell phone is a perfect example. If you sign up for service, you can get a deal on the phone and start using it now.
After reading this article, it reminded me that the U.S. will not be the most powerful country forever. The article says that U.S. debt is not as safe as everyone thinks.
Image courtesy of The Heritage Foundation
America has had a free ride for the last hundred years. America has had the most natural resources, the most immigration, strong investment in industry, and, most importantly, the ability to print money without limit. Why? Because the dollar has been the world’s reserve currency.
That means that the demand for U.S. debt has been unquenchable. Whenever a country or individual wanted to invest in a safe way (whatever that means), they would buy dollars denominated U.S. debt. Whenever the government needed money because it did not manage its finances responsibly, it would just issue more debt.
There’s a decidedly strong backlash against government spending.
There’s always a backlash against government spending. It’s only right: we’ve all done our due diligence cutting our own spending, trying to invest properly, and finding new sources of revenue.
We’ve managed to create and live on a budget.
But here’s the thing. This is nothing new. The movement to force government into the frugality has been going on for a long time. But, each time government services are cut, there’s a huge backlash against that, too. Reagan faced it. In the 1990s, when national parks began to close, budget-cutting was demonized.
What about earmarks? We all hate earmarks, but gladly vote for politicians who hold big check photo-ops into our neighborhood, right?
Here’s the question then: what are we prepared to do to make our government more frugal?
Just when you thought it was safe to start spending and investing again, right?
The recent turmoil in Greece has had a bubbling effect throughout the world. The crisis may or may not have been responsible for about a trillion dollar drop in the stock market, but it was definitely responsible for a trillion-dollar bailout.
But, who cares? Those things are not on your personal financial radar map.
It’s always good to keep up on your personal finance and self-improvement readings. It should actually be a habit, a space you carve out in your day to research, study, and learn.
This keeps you on track and keeps you motivated. I try to vary my reading habits from week-to-week, checking out blogs that specialize in the three legs of personal finance: saving, investing, and spending.
Here are a few links I had a chance to read over the week.
We are living in a material world and I’m a material girl.
These are all common expressions that teach us what money means. Most of us agree what money is, but none of us agree on what money means.
We all have our approach to making and spending money, as well as an opinion on people who make and spend money.
These beliefs affect our personal and our global economy, believe it or not. Obviously they affect your own bottom line, but as these personal beliefs turn into group beliefs, the meaning of money can literally change the world’s markets.
The Singularity is Near by Ray Kurzweil is the book that started it all. If you want to know about the future, it is the best book I've found. Absolutely fascinating.
Rich Dad Poor Dad by Robert Kiyosaki. This is one of the most popular personal finance books of all time. A must read for anyone who wants to become financially successful.
The Millionaire's Secrets is one of my favorite financial books of all time. It's an allegory about a guy who has a terrible job, and how he overcomes challenges to achieve his dreams.
The One Minute Millionaire is a great book about how to become a millionaire. Written by Mark Victor Hansen and Robert G. Allen, this book combines an inspirational story with practical everyday skills.
The Art of Learning is the fascinating story of Josh Waitzkin, the world champion in both chess and Pushing Hands. His style is mesmerizing, and the strategies for learning are priceless.
The Alchemist is one of the best-selling and most inspirational books of all time. Anyone who has ever had a dream in life needs to read it. Perhaps my favorite book of all time.
Love is the Killer App is a powerful, step-by-step book about how to have a wonderful experience and spread love in any working environment. Think the office has to be a source of bad energy? Think again.
The 4-Hour Workweek is a powerful book full of strategies about how to get more done in less time. For anyone who is looking for leverage or wants to achieve success quickly, this book is absolutely invaluable.
There’s a decidedly strong backlash against government spending.
is one of my favorite financial books of all time. It's an allegory about a guy who has a terrible job, and how he overcomes challenges to achieve his dreams.
