In 1929, Belgian painter René Margritte introduced The Treachery of Images: an oil painting of a pipe, under which he had written, “Ceci n’est pas une pipe,” French for “This is not a pipe.”
“Of course it’s a pipe! How ridiculous,” you say. And that’s exactly what his critics said. But could you pack it and smoke it? No, because it’s not a pipe. It’s a representation of one.
Six-ish months ago, my wife and I were chatting about some of our financial goals. The main one for us right now is to buy a home. I make a decent salary and, with it, we could definitely afford a mortgage payment. But due to a number of medical issues we’ve had to deal with throughout our marriage, we’ve never been able to save much for a reasonable down payment.
Despite the validity of that reason, it didn’t stop us from comparing ourselves with our friends who had graduated from renting to homeownership. It was depressing and made us feel like we were lagging behind in terms of financial maturity. There’s a big reason why we’ve held off, though. We don’t want to end up like other people I’ve met.
Learning from others’ mistakes
During my college internship, I sold life insurance for Northwestern Mutual. One day, I met a couple who had a few kids and no life insurance — not a good idea. Their only reason for not having it was because they simply couldn’t afford it. We spent a half hour going over their budget to see if there was anything they could cut back to make room for it, and I honestly couldn’t do it.
Their total household income was $50,000 a year, a decent amount. The problem was that they had a $250,000 mortgage and two car loans totaling $50,000. On the outside, they looked well off with two brand-new cars and a 2,000+ square foot house. But in reality, they had just enough cash to pay the bills and cover necessities. They had no savings, no retirement account and nothing to protect themselves in case the worst happened.
Another time, I met a guy who used to be a stay-at-home dad. A few months after his wife’s maternity leave, though, they realized his wife wasn’t earning enough so he had to go to work. He went on and on about how much he missed his son and wished he could be with him instead of working. As I dug deeper, I learned that his wife drove a late-model Mercedes-Benz SUV and he drove a newish Audi. Between the two of them, they were paying $1,500 a month in car payments.
There were other expensive lifestyle choices they had made because they had grown up with affluent parents and wanted the same things they grew up with. The problem is that their parents were genuinely wealthy and they had only the appearance of wealth. And it was at the expense of something more meaningful to them.
Avoid the treachery of images
Owning a home (or a nice car or toys or whatever) doesn’t mean you’re wealthy. Yet we often confuse those things for it. It’s very possible that some of our friends are in homes they can’t afford. Some of them may be underwater on their mortgage and barely scraping by. Obviously, I hope that isn’t the case, but we live in an economic environment where banks make it easy.
I don’t enjoy renting. Not only do I feel like I’m missing out on the chance to build equity in a home, but I also hate the restrictions. And when I see improvements I want to make, I think, what’s the point?
In spite of all that, homeownership isn’t worth it if it’s at the expense of the rest of our financial goals, and definitely not at the expense of our peace of mind. As frustrating as it is to wait a couple more years to make sure things all our ducks are in a row, we’ll save ourselves a lot of headaches over the long run.
The same goes for other stuff, too. And when you see other people with huge houses, luxury cars or expensive toys, don’t automatically assume it’s because they have money. Instead, recognize that in today’s credit environment, practically anyone could do exactly what they’re doing. You just need to hop on down to the nearest bank branch. (But don’t actually do it).
Take your time making big financial decisions. Map out all your financial goals so you aren’t blinded by the most exciting ones, and make sure your priorities are straight. Most importantly, don’t compare yourself with others. It’s likely you’ll end up making dumb decisions because of it. Also, watch this: