George Kamel - What The American Dream Really Costs

Episode Date: December 9, 2024

💵 Start your free budget today. Download the EveryDollar app!  In this episode, I’m calling Investopedia’s bluff that the American Dream is for millionaires—and you’ll learn what it actually costs.    Next Steps:  🎥 Watch my video Frugal People Never Do These Things.  Connect With Our Sponsors:  🔒 Get 20% off when you join DeleteMe.  💸 Learn more about opening a high-yield savings account with Laurel Road.  📲 Get $5 off the Unlimited Plan and enjoy great nationwide coverage for only $20 at Tello.  Explore More From Ramsey Network:  🎙️ The Ramsey Show    🍸 Smart Money Happy Hour  💸 The Ramsey Show Highlights  🧠 The Dr. John Delony Show  💡 The Rachel Cruze Show  💼 The Ken Coleman Show  📈 The EntreLeadership Podcast    Ramsey Solutions Privacy Policy  Learn more about your ad choices. Visit megaphone.fm/adchoices

Have you heard the news? Apparently, we're all screwed. You can say that again. Not my words. That's just the spark notes from this investopedia article titled, The American Dream now costs $4.4 million. Well, is it true? I AMHO? No. A lot of the numbers they came up with to get to that $4.4 million figure are straight up hogwash. It's malarkey at best, and it's a load of cods swallow up at worst. I don't know what any of those words mean.

And today I'm going to show you why and tell you how much I think. think the American dream actually costs. But first, be sure to make my American dream come true by liking this video and hitting that subscribe button. It's a sad dream, I know, but I call it my own. So what exactly is this $4.4 million American dream all about? Well, Investopedia made educated guesses about the cost of things often tied to the idea

of the American dream. Things like getting married, owning a home, raising kids, eating apple pie, and a lazy boy. You get the idea. And their guesstimates in each of these categories added up to a whopping 4.4 million. Oh, and don't forget their disclaimer. Here's the quote.

The phrase American dream means different things for everyone. Our analysis covers the cost of some aspects frequently associated with the American dream and the reality of these costs for Americans today. It is not a reflection of all costs associated with life in the U.S. today. It may include elements some individuals wouldn't choose for themselves, as well as exclude elements that may be necessary for others. Thanks, guys.

This is why no one reads the fine print. Okay, give me some hook, some intrigues, some Tarantino. some M-night-Shama-Mal-on twists. Make it juicy. Keep me reading. Are you not entertained? Now, above all, Investopedia is obviously trying to send a clear message. You will never be able to experience the American dream because you won't be able to afford it.

And I don't buy it for one second. So don't let these hope-stealers, who weren't hugged enough as kids, tell you what you can't achieve. And to see just how off-based they are, let's walk through their guesstimates in each category, most of which range from off-base to flat-out ridiculous. Up first, cars. The cost, according to them, $811,000.

And this is based on a married couple owning two new cars at all times from age 29 to 75 with a combined monthly payment of $1,468. Mamma meata, this is bonkers. Now, I could talk about new cars losing 20% of their value in the first year, but I don't think I need to. I'm pretty sure we can all just look at these numbers and agree they're completely insane. $1,500 a month every month for your whole life? That's 22% of the median monthly household income. on cars. Since when did a shiny Raff 4 become the American dream? I mean, my parents certainly didn't come to this country to spend 800 grand on a Kia Soul. Can we talk about the Kia rebrand for a second?

Off topic, but important. Who designed that new logo? Is that supposed to be a backwards end? And who's paying the mommy influencers to make the Kia telly ride the new it car? You're not fooling me. When it comes to cars, you can save so much money by paying cash for a reliable, gently used ride. And by the way, that's what most actual millionaires do. The average millionaire drives a 4,000, year old car with 41,000 miles on it. They are certainly not spending $800,000 on new cars in their lifetime. All right. The next cost error, wedding plus the ring. Cost $44,300. Now, I realize not everyone can win a local contest for a free wedding like I did. And $44 grand is the average cost of a wedding these days. But here's the deal. You don't have to spend that much. You don't have to be average.

And in this situation, it's good to be below average. You can have an awesome wedding these days for a lot less than 44 grand. Heck, 15 grand will get you a great venue, great food, a great dress, and plenty more. And that's assuming you pay for the whole wedding yourself and have zero help from family. Now, you might not get live swans or an ice sculpture or a donut wall, but let me tell you, nobody wants to touch those exposed donuts. And have you seen a swan up close? Scary aggressive. No thank you. I'm getting a donut off this. I don't know. Who touched this donut before me? I'm just going to go and grab it. Put it in a box, you filthy animals. Next up, owning a home. Cost? Almost

930 grand. And this is based on buying a house worth around 481 grand on a 30-year mortgage with a 6% interest rate and 20% down. Now, I won't deny, home ownership has gotten insanely expensive, but it doesn't have to be that expensive. And one simple change can make a huge difference in this example. Switching from a 30-year mortgage to a 15-year mortgage. Now, before you start clutching your granite countertops, I am aware that the payment on a 15-year mortgage is higher in the short term, but you also get out of debt twice as fast and save a boatload in interest. How much exactly? Well, if you bought the same $481,000 house with the same down payment, but you use a 15-year mortgage instead, you would wind up with a lower interest rate and paying around

$644,000, which is more than $250,000 less than their guesstimate. And this is exactly why I only recommend buying a home if you can afford the payment on a 15-year mortgage. Next, raising kids. Cost $832,000. And this is based on raising two kids from age 29 to 53, which is, you know, your age while you're raising them, not the kids' age, hopefully. And this is paying about 110 grand for each of them to attend an in-state four-year public university. And yes, kids do be expensive. You got child care, food, and all those trips to the pediatrician because of hand, foot, and

mouth. Seriously, why are children getting this? It sounds like something that a ring-tailed lemur at the zoo would get. Didn't I tell him about the feet? He did tell you about the feet. And hey, I love that Investopedia is planning for the parents to pay for college in cash, instead of using student loans. But it doesn't have to cost quite that much.

Now, 110 grand is about the average total cost for all four years at an in-state school, but you can trim that down with scholarships and by starting out at a community college. You can also save by investing over time in a 529 plan or an education savings account. And that way, just like with retirement, your money can grow for you

so you don't have to contribute quite so much out of pocket. And get this, investing just $200 bucks a month and a $529 plan for your newborn could lead to six figures of 10%. tax-free college money thanks to compound growth. And finally, retirement. Cost $1.6 million. If you know, you know, if you're over 30.

Yeah, baby, yeah. Now, this number is based on making retirement contributions from age 22 to 65. And this one is the worst offender in my book. Now, I don't disagree that $1.6 million is a good number to shoot for in your retirement nest egg. If anything, it's a little low for my boozy taste. But here's the problem. They make it sound like retiring with $1.6 million. million means you need to literally put away $1.6 million of your hard-earned money into retirement

accounts. That's not how it works. Your typical retirement account is mostly made up of growth from the money you put in. Here's an example. Let's say you start saving for retirement at 22, like the article says, but you're only putting in $150 a month. Well, at 11% growth, you'll wind up at age 65 with $1.8 million. But your total contribution, your own money? 77 grand. That makes this article's number about 2,000% too high. That is higher than Snoop Dogg on stilts in a hot air balloon. And I want to see that Photoshop. So make it happen. He's going to look great up there. Now I get it in Vestapedia. Math is hard, but do better than the fearmongering here. Okay? I'm a screw up. I admit it.

All right, we got three categories left, and I actually don't have a problem with any of the math on these. Up first, we've got vacations. Lifetime cost, 179 grand. And that's based on taking a $2,843 vacation each year from ages 22 to 85. Now, I'll be the first. to say that spending around $3,000 for an annual family vacation is perfectly reasonable if you're debt-free with an emergency fund and you're using cash to fund the trip. You may even want to spend more than that. I mean, just for a Bachelorette party in Nashville, you got the pedal tavern, the boot shopping, it ain't cheap out here. Those hot tub buses, they know. They know what they're worth. Disgusting. If you're in a hot tub on a pickup truck, you're doing it wrong. Next up, we've got

pets. The total cost, $36,626.26. And this is based on the typical cost of owning one dog and one one cat for the average life expectancy of each. I don't have a problem with the number. Or with owning pets. I was a dog dad long before I was a real dad, and it weirdly did prepare me for fatherhood. And my hot take is this. You should not own a pet if you can't afford to take care of it properly.

And rounding out the list of things in Vestepedia got right? Funerals. The cost, $8,453. Hey, at least dying is cheap in America. It got dark real quick. Living is expensive, but dying is cheap. Welcome to Georgia's funeral home. We got deals for the dead.

It's giving Beetlejuice. It's giving Michael Keaton minus the talent. It's showtime. Now, this obviously is not something you'll actually have to sign a check for, since, you know, you'll be busy pushing daisies. But it is nice to leave your family enough money to take care of your arrangements, so they have one less thing to worry about. And I hope you live long enough to build enough wealth that this is not an issue for you.

Okay, so that does it for Investopedia's educated guesses, which taught us that the American Dream does not, in fact, cost $4.4 million after all. But we still need to know what it does cost. So let's go back through each of the categories and talk about how much you should be spending on all of them over the course of your life. And buckle up because it's time for the American Dream, George's version. Get out of here, Scooter! Scooter! No, scooting! Scooter Braun. First, though, you know what's definitely not part of the American Dream? Getting a text message from your boss asking you to buy them eBay gift cards while they're in a meeting.

If that's happened to you, it means your personal info has fallen into the hands of shady people on the internet. And even if you have you have to have a message, you have a haven't gotten one of those texts, it's only a matter of time. And that's why I'm thankful for a sponsor of today's episode, Delete Me. They work to delete your info from thousands of scammy data broker sites all across the internet. And doing that work on your own can easily take hours upon hours. So when it comes to expenses that are worth it, protecting your personal info online is worth every penny. So head to join DeleteMe.com slash George to get 20% off any of their plans. I'll also drop a link in the description below. And if you've been keeping your savings in a brick and mortar bank, you've been missing out

on the best interest rates. And I love going through a bank drive-thru and getting a lollipop as much to the next guy. But you've got to put your money in a high-yield savings account with an online bank like Laurel Road. They can help you grow your money faster and they're a sponsor of today's episode. They offer competitive, top-tier interest rates, along with no fees, no minimum balance, plus all of your deposits are FDIC insured. And the best part is you get help from real people when you need it because of their premium care team. So go check them out today at laurelroad.com slash George or click the link in the description below. All right, let us bless this mess. We're going to start by keeping the same amounts for vacations, pets, and funerals, which amounts

to a little over $224,000. Now for retirement, let's not contribute $1.6 million. It's completely unnecessary. Now, normally, I recommend investing 15% of your household income into retirement accounts each month. But to keep things simple for this example, we'll plan on investing a flat $150 bucks a month from ages 22 to 65 to build that $1.8 million nest egg. So the new contribution total, just $77 grand. Boo-ya. Next up, we've got cars. Yeah, we're not going to be constantly financing brand new cars for 45 years. Instead, what if we bought two really nice $30,000 used cars with cash at the age of 30? Then every five years, we sell the cars and spend another $10,000 each burn upgrade. Still a sweet life. New total, $240,000. On to the wedding. We're going to budget

for a $15,000 wedding plus a $4,000 ring. New total, 19 grand, and the marriage is even better somehow. Sweet, sweet matrimony and savings. Next, we've got owning a home. Now, to be generous, we'll buy the same home that they used in the Investopedia article, but instead, we're going to do the 15-year mortgage. So the new total, if you paid it off in exactly 15 years, and not a day earlier, $644,000.

And finally, we've got raising kids plus college. Like we talked about earlier, we can save some money here by investing for kids' college over time through a 529 plan or an ESA. So instead of writing $210,000 checks for college, we'll invest $225 a month for 21 years while the kids grow up. And that will add up to $220 grand in our ESA and just $56 grand in contributions that we actually made. Now, we'll add that to Investipedia's estimate

for the actual cost of raising two kids for a new total of $668 grand. You ready for your grand total? Investopedia? 4.4 million. Georgia's version, 1.9 million. I don't know about you, but I'm feeling a whole lot better about the American dream now. So what did we learn here?

Two things. First, the American dream looks different for everyone. Maybe travel is a priority for you. Maybe you want to have a big family. Maybe you want to build a regulation-sized pickleball court in your backyard to dink in privacy. The bottom line is that your version of the American dream doesn't have to include all the stupid stuff in Vestepedia thinks you need. You can make it work for you. Just please don't let your American dream include $800,000 worth of car payments.

you don't have to subscribe to the insanity of American consumerism. And second, if I may, the American Dream is not dead, despite what all the doomsday hope-stealers want you to believe, because scary numbers make for a great headline, but not much more. If you're doing the right things with your money, you'll be in good shape to live a great life. But there is one thing that can make your finances go off the rails, making stupid mistakes with your money.

And people who win with money over the long haul run away from the common money traps, but you can't avoid them if you don't know what they are. So watch this video next for a list of things frugal people never do. I'll also drop a link in the description below. Thanks for watching. See you next time.