San Diego Housing Bubble News and Analysis

wealth is a store of value. What you were witnessing was consumption, not wealth.

One pretends to be rich, yet has nothing.
Another pretends to be poor, yet has great wealth.
Who do you want to be?

In our neighborhood in Murrieta, I have noticed lately that several of the homes that have gone into foreclosure were the homes of people that had the fanciest possible cars, RVs, lots of upgrades to their property etc. They spent big, and went down fast.

I believe that to be wealthy in America you need a net worth of $20 million, and your assets need to be diverse.

JS

Scaredy: Excellent synopsis.

I live in an area defined by consumption, but it poses as wealth. However, those driving Escalades, BMWs and Mercedes are rapidly shrinking in number, as are the kids sporting the newest cell phone and electronic technology and the $25K "Sweet 16" parties.

It looks like "Frugal" is the new "Rich". And I think its a good thing. We've been overextended and overdosing on credit for nearly two generations now and mocking the values that did make America "wealthy": Prudence, virtue, frugality, hard work and self-sufficiency.

Okay, enough preaching. "Real Housewives of Orange County" is on!

Just gave away my M3 to my brother. So much happier being car-less.

The question is what is value? The FED has successfully inflated the paper value (or paper wealth) in this year while the real wealth (measured by industry output, GDP growth, employment, etc) is declining.

Oh, yes, that is consumption. I some friends that spent years buying fancy cars, flat screen TVs, remodeling, all the latest and greatest items, and then re-financing a house they bought in 2000 several times to pay off the CC. Eventually, even the last re-fi they could not pay off the CC's. They always called me "ghetto girl" as I live in Northpark. But, who did they come to when they wanted to borrow money for the re-fi's? Ghetto girl!

So, the one guy got laid off 18 months ago, decided he still needed top of the line stuff, and circumnavigated the globe for months. Fancy hotels, only the best for him--all beds must be triple sheeted! Did it all on the CC. Interest rates skyrocketed, and he kept on spending. Now, he has 4 weeks left of unemployment, and has filed bankruptcy. Oh, and he has no regrets. Said it was worth every penny. Fortunately, his partner has a job, but his debt is high too, so it will be interesting to see what happens next.

And, "my" bank is closed...they are a poor credit risk. I wish them nothing bad, they are good people, but have bought into what looks good rather than savings in the bank.

My father always said...."the guy with dribble down his chin may be a millionnaire." Looks are deceiving.

Loved your post, Ricechex. :)

Those who are truly wealthy don't need to prove anything to other people. Your father was right.

Wealth is being able to afford your lifestyle and still have money in the bank.

I've known a few folks who fit the "millionaire next door" stereotype... leading moderate but comfortable lives - with the freedom to do whatever they want. My dad was one of these. Lived in a 2000sf tract home in UC - but circumnavigated the globe several times in his retirement. With lots of shorter trips in between these 3-4 month trips. He paid cash for it all. If he wanted some new electronic toy, he had the money to buy it with cash. But he wore clothes that were less than fancy, the house was well maintained, but not upscale, he rarely ate out.

Yet I would consider my father wealthy because he had total financial freedom. He may not have had a beach front mansion nor mercedes, but he had everything he needed for a very content life with no debt and cash to do the things he was passionate about: 4wd trips to baja and travel around the world.

I aspire to his wealth. I bought the house from him - it's still not fancy - but suits our needs. I'm working on getting the cash reserves and mortgage retired to live the wealthy part - no worries about money and freedom to travel or do whatever my passion is.

Fancy stuff doesn't represent wealth. Freedom from worries about money is wealth.

Wealth to a human is something like a car "running on all cylinders". It never is is a goal attained rather an equilibrium maintained in a matter of degrees from one day to the next, where things are prone get out of whack. Spending less time out of whack is wealth.

Of course, basic material security is a component for most of us and apparently much more than that for many. I think of the idea from the Bible, "It's harder for a rich man to enter heaven than for camel to go through the eye of a needle". Wealth is a "heaven" of the type I am talking about a contented equilibrium to which access is only marginally affected by money or the things easily converted to money.

Wealth is having time to do what you want.

from my dictionary. wealth: abundance of valuable material possessions or resources.

under that definition, maybe the conspicuous consumer is wealthy.

True wealth belongs to those with a big heart, not necessarily a big bank account. My parents were not wealthy, but they were respected for their generous spirit and they did tithe to their church. Generosity is the hallmark of the spiritually wealthy person. Materially wealthy people are often parsimonious psychologically and spiritually and emotionally stunted. Not all wealthy people behave this way. Bill Gates is an obvious exception, as is Oprah.

http://www.youtube.com/watch?v=kglXIoiXDFM

Interesting that so many are taking the philosophical approach to wealth.

Wealth is net-worth as of a certain date based on your statement of net worth. Even if you don't do such statement, that would be your wealth if you added up everything you own less what you owe.

If you spend your wealth then you don't have it anymore.

That being said, wealth does not equal contentment, satisfaction of happiness.

UCGal said it best. "Freedom from worries about money is wealth."

My brother and I spent years trying to teach his kids this and in their late 20's with bosses they dont like they now get it. Someday I hope my kids (much younger) get it too.

For our family, wealth (in the financial sense) is having a great home, being
debt-free, having seven figures in savings, and the freedom to do what we want when we want to do it.

UCGal has nailed it as far as I'm concerned:

Fancy stuff doesn't represent wealth. Freedom from worries about money is wealth.

I hope you aren't putting my comment in the "philosophical" bin. It is very practical, indeed.

Having time to do what you want takes cash, and lots of it. Even if you just want to sit there and do nothing, you have to have money to generate some income to pay for a place in which to sit.

You can have all the toys and square footage in the world, but if you have to work 16 hours a day to pay for it, you still aren't wealthy as you don't really get to use the toys and you truly don't have the time to do what you want.

Of course, some have toys and houses they don't use, AND they have time to do what they want, so they are really wealthy.

I like thinking about wealth in terms of time instead of money. It works for me. It keeps me focused on what I'm really trying to accomplish with my wealth-building activity.

If you need little more than you have, you are wealthy. That can come from having alot, or from not needing much, or a combination thereof, but for me it all boils down to - "how am I spending my time?"

Working all the time = not wealthy
Working some and playing some = average
Not working and doing nothing = pretty good
Not working and doing fun stuff = wealthy
Not working and doing extremely fun and expensive stuff that requires lots of expensive toys = really wealthy.

UCGal's perspective is similar, and I think also not philosophical. Being free from worry about money is a very practical view of wealth.

sdduuuude, some people love to work. That's fun for them.

To me, wealth is not a lifestyle but how much money (or equivalent) you have net of liabilities.

I'm not saying that my goal is to be wealthy. Nor am I saying that people should not enjoy their lives in pursuit of wealth. Sure people should develop a lifestyle is is most comfortable to them.

But wealth is just a word to describe something just like "table" or "computer". It's not a philosophy of life.

There are two ways to become wealthy. One is to acquire more, and the other is to require less.

I, too, like UCGal's definition of wealth as well as the "acquire more or require less" idea.

Interesting that many of us have parents and grandparents who somehow figured out how to live well without incurring mountains of unsustainable debt...it seems that one of the failings of this generation is that many have squandered what could've truly been "the good life" by wanting more, more, more.

My beloved grandmother (a Depression-era person who passed away 3 years ago at age 94) once told me that she made it a game to try to live at or around the poverty line. She also told me that, after the Depression, she realized that out of the three essentials in life - food, clothing and shelter - you can usually find a way to get at least two of them. In her view, most people have enough clothes to last their lifetime, and we can often find enough food to keep us going in this country, but that finding adequate shelter (e.g. holding on to our homes) was the greatest challenge in a financial crisis. She absolutely pounded it into me and my siblings that only when we paid off our mortgages would we be able to be completely assured that we would weather the next inevitable financial cycle downwards (or worse) without enormous stress or perhaps even personal devastation.

I remember her also once explaining that the things that brought her the most joy in life didn't cost money anyway. Those words stuck with me because they ring true for me, too.

She truly loved life, was absorbed in her work (as a university professor and writer/historian), and lived a very simple yet full life. She was the most open-minded person, always interested in others' ideas and experiences and naturally inquisitive and curious...clearly the stimulation in her life didn't come from acquiring things but instead, she valued her interaction with people, ideas and the world around her.

I don't think she ever felt that she was scrimping - it just never occured to her to spend big bucks on cars or dinners out or other things.

When she died, her estate was worth well over $2mil, all of it saved during her lifetime, even after being wiped out in the Great Depression.

It's almost a cliche to remark on how much we should have/could have learned from prior generations! Interesting how somehow the inevitability of this financial crisis was apparently unforeseen to most of this generation.

Great story. You just described my mother too.

Back in seven we used to say "Follow a Hummer to a pre foreclosure home."

Two years on close to 100% correlation!

I agree with your observation regarding the philsophical notions, or the question of lifestyle, vs. a dictionary definition of wealth, Brian1.

I guess I skirted the literal definition because it didn't seem very interesting. What people do for and with wealth and the effects of it is pretty interesting.

Sure is. The caveat is, he WAS a corporate travel manager, and he did have some benefits, free first class flights (he ONLY flies first class--anything other than first class is "peasant class").

However, between the all-inclusives in Mexico and Bahamas, months spent all over Europe and Egypt (Cairo is expensive!) and our dollar to the Euro, he spent some SERIOUS bucks. Whatever he got for a discount, he upgraded.

And, when he was home, he was running to Walmart buying Wi-Fit games, new IPODS, upgrading his phone, etc. Macys and Nordstroms clothes only--not just one pair of Tommy Bahama shorts, but several in every color. He always prided himself on getting a good sale, too. No sale is a sale when you are paying interest charges on it, I said. He was lunching with friends, and going to those "take charge of your life" conferences and staying in downtown hotels. He treated us to one round of drinks at the US Grant, came to $50.

No TJ Maxx or JC Penney: that was for the tacky people! (Like Ghetto Girl) Of course, that is how he has always been...which is why the CC got maxxed out before every re-fi. He wanted to get a new car, he had a 3 year old Acura with ALL the bells and whistles, but didn't like the way it drove, but they weren't giving unemployed people any loans these days.

The sky was the limit! It was unbelievable. Reminded me of that old Jerry Lewis movie, when he mistakenly gets diagnosed with a terminal illness and goes crazy doing stuff.

Now, he thinks he is going to make big bucks in some MLM scheme called Blast Off. Hmmmph...I had to join and create an alternate email address for it just to get him off my back!

Ricechex: I would like your guy, I really would. Sounds like he appreciates the finer things in life. For example, I like me some Tommy Bahama. I don't consider a $50 round for friends excessive at all. I love 1st class (though I don't fly it exclusively by any means). I don't know about triple-sheets, but I do like nice bedding (you'll know it when you feel it).

On The Other Hand - I pay off my CC every month. And even if I didn't, I would basically pay my bill no matter what - however long it took. So he and I would have a relatively large disagreement there.

You can tell him KSM says to "be a man". If not this time, then next time.

And I too thought UC Gal's definition of wealth was right on target.