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What If I Spent My Money Like 90% of Americans?

Did you know that the median American savings is $0.00 each year? Since pensions are now nearly extinct and Social Security is teetering on the brink of failure, you’d think that Americans would  be saving much more now than in the past. In reality, however, many are saving far less.

Take a look at the chart below. The bottom 90% of earners in America typically save less than 5% of their income each year. And, as of the year 2000, they are saving even less than that (even into the negatives at times)! Some people reason that the low savings rate is natural because the bottom 90% are earning less to begin with. I agree with this to an extent, but is a 3% savings rate really the best a family can do that’s earning more than $50,000 per year? After all, that would mean that they’re only saving about $125 a month. This minimal savings amount will not fend off Murphy very well, nor will it make for a fun retirement. Americans should be (and I believe could be) saving much, much more.

what if i spent my money

What If I Spent My Money Like 90% of Americans?

The vast majority of Americans are spending almost everything they earn each year. From the outside looking in, it may not always look like irresponsible spending, but for many, living this light on cash is an absolute choice. These people are not tight on cash because they’re victims of a downturn, and they aren’t in dire straights because they have all those little mouths to feed (as they often say). The excuses are many, but the true reason for a low savings is almost always the same: it’s due to their irresponsibility and their many poor choices.

On December 11th, 2014, I cleared my name of all debts including my home mortgage. Without any payments whatsoever, my discretionary income has skyrocketed, which then got me wondering, “What if I spent my money like 90% of Americans?” In other words, what if I only saved about $125 a month and paid for the rest of my possessions with credit?

Since I live on practically nothing, I have about $2,500 that is earmarked for nothing each month. What could I be enjoying if I loaded up my credit? Let’s have some fun and find out!

1) Cottage on the Lake

My first item that I would buy on credit would be this gorgeous 1,800 square foot cottage on Big Star Lake. It has a newly renovated kitchen and 84 feet of lake frontage. How would you like to wake up to that lake view every day?! Looks pretty awesome to me. The price tag is about $325,000, so over 30 years at 3.93% interest I would owe $1,538 a month.

what if I spent my money


what if I spent my money

2) Mercedes Benz

This Mercedes would be my next purchase. Believe it or not, I found it used on Craigslist for $13,000, so it’s a decent purchase, but it would come with more payments. A five year loan would have me paying $219 a month. Not too shabby considering what some people pay!

what if I spent my money

3) Boat – 33 Footer

This boat certainly isn’t brand new, but it’s 33 feet long and has a ton of space with the multiple decks. The price tag on this is also $13,000. but I’ve discovered that interest on boats is a bit higher than on cars or houses, probably because there is more risk of default. After all, if given the option of paying your mortgage or your boat payment, which would you choose? I’m pretty sure 99.9% of the population would make the mortgage payment. So, with the interest charge of 7.99% and a term of five years, my payments come to $263 a month.

what if I spent my money

4) Jamaican Vacation with My Wife

Finally, with the money I have left each month I would take my wife on a gorgeous Jamaican vacation! I found this amazing deal on – it’s an all inclusive four night stay and only costs $849 per person. Since I don’t have the cash (hypothetically), I would just put it on my credit card and make payments of $150 a month.

what if I spent my money

What Would This Mean For Me?

Let’s sum this up here. In the beginning, I had an extra $2,500 a month that I could have used for anything. If I decided to purchase all the items above, here’s what my monthly spending would look like:

  • Cottage – $1,538/mo.
  • Mercedes – $219/mo.
  • Boat – $263/mo.
  • Jamaica – $150/mo.
  • TOTAL = $2,170/mo.

I had $2,500 a month to spend and with those four big ticket items above, I still only came to $2,170 a month. But, with insurance, taxes, and maintenance on those purchases, I’m pretty sure my full $2,500 would nearly get used up every month.

Alright, so now I own my house, a cottage, a Mercedes, a pretty large boat, and I took a pretty awesome vacation. To almost every human being on this planet, I would be living the good life (and to be completely honest, it would be pretty sweet to own all of these things right now). But would this really be true? If I spent my money like the other 90% of America, life in the present would be amazing, but what about life in the future?

1) Trapped in My Job for the next 40 Years

By purchasing that cottage on a 30 year note, I am signing myself up to work my full-time job until I am at least 60 years old! I don’t particularly dislike my job, but I would like to have the option to do something else at some point – maybe purchase some rental properties or become a speaker to college kids about their future lives – whatever it may be, I want to have the option to do it.

Then, the next 10 years (beyond paying off the cottage) would involve me scrimping and saving so that I could scrape together a retirement before I died! I don’t know about you, but this is not the career path that I had in mind for myself.

2) An Increased Amount of Worry

The more you own, the more there is to worry about. By owning multiple houses, I would have to think about keeping the inside clean, the outside maintained, and I’d have to worry about protecting them while I was gone. Then there’s the fancy car and the boat in the slip. I’d have to keep a constant watch on both of these items to protect them from wealth-hating hooligans. At this point, I think I would almost rather have less to get rid of all worry.

3) A Stagnant Net Worth

When you buy stuff on credit, it will almost never increase your overall net worth. The Mercedes and the boat will be worth hardly anything in 10 years, and I’ll be out almost $30,000 when factoring in the purchase price with the interest payments. The cottage will likely be worth more, but after 30 years of interest I will have paid the bank $554,000 for it, so there probably isn’t a huge gain there. And, the vacations will just be a distant memory and will obviously be worth absolutely nothing. After 40 more years of hard work, I’ll have very little to show for it.

But What If I Choose to Save and Invest??

What if, instead of spending all of my future money (which is what you are doing when you buy on credit), I learn to live simply in the present and save for the future? What would be in store for me?

I could honestly go many routes here. I could invest my money into real estate, I could put some of it in the stock market, and I may even invest another portion into my own business venture on the side. What if, on average, I can earn 10% per year on my $2,500 of extra money each month? How much would I have in 10 years? 20 years? 30 years? 40 years?

After 10 Years of Investing…

If I invested my $2,500 every month for 10 years, I would have $526,000 to my name after that 10th year. Does that number sound familiar? That was pretty close to my entire net worth after 40 years when I bought the cottage, car, boat, and vacations! By forgoing those things, I was able to acquire the same amount of value in just 10 years!

At this point, I would be comfortable looking around at other jobs that might interest me a little more, or maybe I would just start working for myself on something that I enjoyed. Already after just 10 years, this option is starting to look better than the previous 40 year plan of consumerism.

what if i spent my money

After 20 Years of Investing…

If I were to invest my $2,500 for 20 years, I would accumulate $1.9 million. At this point, at the ripe old age of 50, I could seriously start thinking about retiring.

what if I invested my money

After 30 Years of Investing…

If I kept working and investing into the 30th year, my net worth would grow to $5.4 million!

what if I invested my money

After 40 Years of Investing…

And, just for kicks, if I really still wanted to keep working and investing into my 40th year, I would attain a net worth of $14.6 million. Umm…pretty sure this beats the “buy everything right now strategy” and coming out of that with far less than a million.

what if I invested my money

The Ultimate Takeaway

While even I was enticed with the idea of owning a cottage on the lake, driving a Mercedes, tooling around on my boat, and traveling to Jamaica each year, it is clearly not worth the opportunity cost of investing. Now, I don’t need to have $14 million, but I would like to have options in life. If I decided that my job just wasn’t for me 10 years down the road, I would like to be in a financial position to leave that job and try something totally different that would make me happy. Wouldn’t you want this for yourself as well?

If you would like the gift of time and options, then I suggest that you ignore the fancy high-class lifestyle around us at the moment. Instead of taking on massive amounts of debt today, do everything you can to increase your income and decrease your expenses so that you can buy those items in the near future with cash. Not only is it more financially wise, but it will turn you into a better person as well.

What about you? Are you living like 90% of Americans? Or will you choose to live differently?

Related Post: Ditching Your Debt Could Lead to an Extremely Early Retirement

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My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.


  1. I agree 100% with you….though that is a sweet house! Sadly, even after reading this, most people will still keep following the same path because the urge for wanting things now overrides the wealth accumulation potential in 10, 20, 30 years or more.

    • Haha, yeah. We nearly fell in love with that cottage. Maybe in 5 or 10 years after our first million. 😉 But yeah, you’re right, people will keep making these stupid purchases at the expenses of the rest of their working lives. It’s just going to happen. Maybe this article will touch someone though! Maybe they’re looking at a second home purchase now and this article helped them realize that they could better invest the money and have more life options in just a few years. Maybe, just maybe….

  2. OK, Derek,
    You’ve got me completely discombobulated – Seriously! I already have damn near $1M saved (and my net worth is way more than that). What is wrong with that sweet, little cottage on the lake? And I’m an old guy. Not seeing anything wrong with that.


    p.s. I am doubting your math! Lovin you, but doubting your math – have you raised a kid or 2 or more? Put them thru college debt-free, paid for a wedding (or more), helped them with a down payment on their house, helped with a grandkid who has special needs???????????? Done any of that?

    ‘Cause if/when you’ve done all those things, that sweet, little cottage looks really, really sweet – and deservedly so!

    • It’s all a matter of context, Jim. I’m 29 years old. Sure, I have no debt, but my retirement savings is still nowhere near the 6-digit mark. Buying a cottage at this moment would not only be unwise, it would be unsafe for my future. I have not yet earned the right to buy this cottage. You, on the other hand, could buy it with cash (p.s. more than 90% of Americans don’t have the money to do this) and might even still have enough left to still live comfortably in retirement. But, you should still take caution as this means extra maintenance, extra property taxes, and additional insurance each year.

      Also, having kids and helping them through college will certainly weigh on your finances, but the math still works. If I saved up my cash over the next two years (before having kids) and purchased two rental properties, I have effectively just increased my income by about $1,500 per month. By doing this, I am essentially funding the expenses of my children, but still able to sock away that $2,500 each year.

      As always, thanks for the questions, Jim!

  3. This is such a great article! I love how you lay out the “facts” about how most people spend their money – and then contrast this to what they *could* be doing. I’ve tried explaining this to friends and family several times over the years but you’ve done a much better job than me my friend!

    • Thanks Richard! There are so many things I could be buying on credit right now, and it would probably impress all my friends and co-workers, but it would all be at the expense of an amazing future! I’m just not willing to compromise my future self. Feel free to pass this article along to them in a mass email! 🙂

  4. Great idea,Derek!
    I think that says it all! If you cut too deep, then you’ll go crazy not spending any money. If you don’t pull back on the leash sometimes, then the you’ll never save any money either. It all has to do with walking down the middle and finding out what works in your household.
    In my family, one thing we really all value are nice vacations. I know most people shrug them off as being lavish or unnecessary. But when we think back to our best experiences over the years, it was during our times of travel. I’m all about the experiences!
    A big part of budgeting is setting priorities.. While we are getting our finances in order, I still keep my high speed internet, my cable tv, my data phone, and I still buy a coffee or a six-pack every once in a while. But we very rarely go out to eat, I don’t spend any money on movies or music, and I am paying off debt more and more quickly.
    If things got tighter, I would scale back even further. But some spending is definitely required to maintain sanity.

    • Yup, there’s definitely a balance between saving and spending and it should simply align with your goals. If your ultimate goal is to retire by the time you’re 35 years old, then buying a second home probably wouldn’t help fulfill that goal would it? Instead, you should probably cut down on your budget, increase your income, and then enjoy early retirement from the time you’re 35 until you die! Thanks for the comment, Amos.

  5. Great way to point out what your money could do for you, good and bad. It would be nice to not be frugal and save and instead have a nice BMW, boat, and maybe even a vacation house somewhere. Personally, I’d take being able to retire in 4 more years instead, which is the route I’m on. I got stuck in that consumerism hamster wheel for a bit, but then I started asking, “Do I want this or do I need this?” The spending dropped and savings increased like mad!

    • Well I’m glad to hear you’re off of the consumer hamster wheel! Keep up the frugality and let me know what retirement is like when you get there! Thanks for the comment, Mr. SSC.

  6. I agree with your concept, although maintaining an annual 10% investment yield might be kind of hard. Just look at interest rates now, and the stock market is so volatile you could earn a lot more….or significantly less. I personally wouldn’t buy any of those items on your list. Well, the Mercedes for $13K is a pretty sweet deal. But assuming you reach your 40 year goal, what will you do with all that money. I assume you worked until you were around 65. Wouldn’t it have been nice to retire when you had, say, $10 million. Could you possible spend all those millions in your remaining lifetime? I guess what I’m saying is that you have a great outlook about not spending every spare penny but at some point don’t you look at the $14 million and think you could spend some of it? How much is enough? And if you worked your whole life only to accumulate that money, what are you going to do with it?

    • Hi Kathy! I plan to earn more than 10% in real estate. By investing with cash, an $80,000 house in my area will net approximately $1,000 a month. So even with a few expenses and vacancies, 10% shouldn’t be out of the realm of possibility.

      As for the $10 million, I just wanted to show everyone what was possible. If you want to spend an extra $20,000 a year in your 50’s and have only $6 mil in retirement, that’s perfectly fine with me! Thanks for the comment! The numbers may seem high, but personally I’d rather have too much money than not enough!

  7. The most important thing your money can buy you, is freedom! Keep going with a high savings rate, you will have reached financial independence in 10 more years. Then, if you want that cottage, buy one and keep on working! If it gets too bad, you can always sell it and do an early retirement..

    • Exactly! You and I are definitely seeing eye to eye, Kenneth!

  8. Great article, but from where are you expecting to get the 10% annual return used in your calculations? Are you assuming the stock market will continue to go up?

    • Real estate and business ventures! I invest some money into index funds – more as a fail-safe than anything, but in my area $80,000 cash can actually buy a pretty nice house that will rent out for about $1,000 a month. Sure, there will be some vacancies and some expenses, but overall I certainly don’t think 10% is out of the question!

  9. Came over from Rockstar Finance and really enjoyed this one. Also made me laugh because about 4 or 5 years ago I was selling a similar Mercedes Benz on Craigslist, instead of course to be on the other side and not owe any money.

    • Haha. Glad I could make you laugh with the Mercedes, ES! Sounds like you’re wiser now. 🙂

  10. Nice visual representation of spend versus save. Not going to lie, that cabin looks nice though. You’ve got to live somewhere…

    • Yeah, it was pretty tempting, not gonna lie. But, we actually like to explore on our vacations (this cabin is too far away from my work to be our regular house), so it would probably get old pretty fast. Thanks for the comment Adam!

  11. Great post. Live like no one else will in your 20’s, so you can live like no one else can in your 30’s and beyond.

    • You got it! I’m still hanging onto my 20’s, but not for long! My 30’s are going to be a blast though. New beautiful wife, plenty of money in the bank, and work will likely be optional. 🙂

  12. Having that much stuff seems exhausting! At the very least, keeping up the payments tires me out.

    Also, when I saw the car, I immediately heard Janice Joplin singing, “Oh Lord, Won’t You Buy Me a Mercedes Benz?”

    • Ha, Abigail – I actually had to look up Janice Joplin to see who the heck you were talking about! But yes, I saw the song about the Mercedes. Funny! Yeah, I agree – all those items and payments would stress me out to no end! I think I would rather rent them from time to time than to make all those payments every month!

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