This article is by staff writer Holly Johnson.

A few weeks ago, I was browsing the Internet with my morning coffee when a link to a write-up at USA Today caught my eye. It read “Price tag for the American dream: $130K a year.”

The article, which is based on a study conducted by researchers at Cornell University, claims that the rising costs of everything from food to housing have resulted in a new American dream that is out of reach for all but the one in eight American families who earn at least $130,000 per year. They apparently wrote a book about their study as well, in which they described the American dream as “finding and pursuing a rewarding career, leading a healthy and personally fulfilling life, and being able to retire in comfort.”

Why does the American dream suddenly cost 130K?

But, $130,000? Confused, I dove right in, picking the piece apart in an effort to understand where the authors were coming from. I even wondered if I had misread the title or discovered the world’s most unfortunate typo. No such luck. Here is the basic rundown of the new price tag for the American dream, according to USA Today:

Essentials — $58,491

  • Housing ($17,062)
  • Groceries ($12,659)
  • Car expenses ($11,039)
  • Medical ($9,144)
  • Education for two children ($4,000)
  • Clothing ($2,631)
  • Utilities ($1,956)

Extras — $17,009

  • Annual vacation ($4,580)
  • Entertainment ($3,667)
  • Restaurant dinners ($3,662)
  • Cable, satellite, Internet, and cell phone ($3,100)
  • Miscellaneous expenses ($2,000)

Taxes and Savings — $54,857

  • Federal and state taxes ($32,357)
  • College savings for two children ($5,000)
  • An assumption that at least one working parent maxes out their employer-sponsored 401K ($17,500)

Total: $130,357

Although some of these averages seem startling, a handful can be easily explained. The cost of housing, for example, was predicated upon the median price of a new home ($275,000) and a down payment of 10 percent. Then they simply spread the payment over 30 years at 4 percent interest. We all know how the cost of housing varies drastically due to geography, so it makes sense that areas with expensive real estate bring up the average cost for everyone.

Transportation expenses at $11,039 seem high too, but not so much when you consider that the average car payment reached $471 in Q4 of 2013. With the typical monthly car payment reaching epic proportions, it is not hard to imagine any family spending far more than even this study suggests.

What about the rest?

But does living the American dream truly require an annual vacation to a luxury resort as the study suggests? I don’t think so. We all know that many families prefer the simplicity of a campsite under the stars and the opportunity to show their children the beauty of nature. Others relax at home, go on cross-country road trips, or travel to visit family instead. Are they simply doing it wrong?

And it’s hard for me to imagine a family of four that needs to spend $16,321 on food to achieve the true American dream. They might want to, but it is certainly not a requirement. That’s $1,360 per month in case you’re keeping track, and a ton of cash if you are making any kind of effort to keep your costs down. Does any family need to spend that much money on sustenance to be truly happy and prosperous? Hardly.

What is the American dream?

In the book “The Epic of America,” James Truslow Adams stated that the American dream is “that dream of a land in which life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement. It is a difficult dream for the European upper classes to interpret adequately, and too many of us ourselves have grown weary and mistrustful of it. It is not a dream of motor cars and high wages merely, but a dream of social order in which each man and each woman shall be able to attain to the fullest stature of which they are innately capable, and be recognized by others for what they are, regardless of the fortuitous circumstances of birth or position.”

Those words were written in 1931 and, although I’m sure there are multiple meanings and theories, I interpret Adam’s words to mean that the American dream is synonymous with opportunity. In that sense, the American dream might not be something that is achieved all at once, but an ongoing journey or phenomenon that happens over time.

Unfortunately, as the USA Today piece shows, for some of us the American dream has now devolved into one based merely on consumerism — a lifestyle that cannot be achieved without cable television, regular restaurant dinners, and a smartphone for every child; one in which a 4WD SUV is the norm and the food bill runs upwards of $16,321 per year for a family of four. A life of consumption.

This isn’t my American dream, and it doesn’t have to be yours.

The American dream is what we make it

I worry about sweeping generalizations about the purported new American dream and the message it sends at a time when so many people are struggling. Those who are trying to get ahead and making progress could see the 130K figure and believe that the goal post is moving faster than they are.

But when someone tells you that you aren’t, in fact, “living the dream,” should you listen?

I don’t think so.

It’s true that times are tough. The price of everything from food to healthcare is whirling out of control, and full-time jobs are hard to find. In fact, so many people are working several jobs just to make ends meet, let alone get ahead, or — heaven forbid — get rich slowly.

Headlines like those in USA Today don’t help. In fact, they make us feel as if the American dream is much further out of reach than what we thought. They tell us that we need more, that we aren’t trying hard enough, and that we may never succeed.

It’s a lie.

Defining our own dreams

Instead of falling victim to this trap, I challenge you to follow your own dreams — no matter what they may be. Decide what brings value to your life and the lives of people around you and pursue it. Find happiness in small things that don’t cost much, if anything at all. Choose a life that is fulfilling, challenge the status quo, and ignore those who keep perpetuating the idea that we would all be happy if we only had more money and more stuff.

Find your own American dream and refuse to let someone else define it for you.

Chances are, it won’t cost anywhere near 130K.

Do you feel like you have a shot at the American dream? How much money do you think the American dream requires?

This article is about Planning

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This article is by staff writer April Dykman.

Many years ago, when I was paying off a car loan and some credit card debt, I became really frugal. Almost obsessively frugal. I looked for every possible way to save money, and I dreaded ever having to spend money.

Then one morning my husband accidently broke our coffee carafe. I helped him clean up the glass and caught myself feeling anxious about having to buy a new carafe. How much was that gonna cost?

As it turned out, only $12. That’s when I knew I had swung too far in the tightwad direction. I’d gone from not really being in control of my money to being a control freak. And it was making me miserable.

From one money extreme to the other

Before I educated myself about personal finance (starting with GRS, actually!), I never tracked how much I was spending. When my credit card bill arrived each month, I had no idea how high or low it was going to be. If it was low, whew! I could relax. If it was high, I’d buckle down for a few months and pay it off. Then I’d continue with my previous spend-now-worry-later habit.

Opening the credit card bill was pretty stressful back then. Here’s what I wrote almost five years ago about that period of my life: “My stomach dropped as I looked at the balance, added the expenditures in my head, and realized that yes, it was correct. The bank didn’t make a mistake. I bought that stuff.”

Eventually, I started learning about emergency funds and the real cost of paying interest. As I followed J.D.’s story, I slowly started to get my own financial life in order. I saved a small emergency fund first; then I started to tackle my debt.

Being type-A, though, I felt like I had failed in the personal finance area of my life. So I wanted to pay off my debt as soon as humanly possible. I wanted it gone, erased from my credit report and erased from my life. I dreamed of the day when everything would be paid in full.

But somewhere along the way, I started to get anxious about spending money. I worried that I wasn’t getting the best deal. I beat myself up because I’m terrible at clipping coupons and remembering to use them. I’d read frugal blogs and kick myself if the writer DIYed something that I just bought. Spending was making me miserable.

Now, there’s nothing wrong with being frugal. But replacing a $12 carafe shouldn’t ruin your morning, you know? I didn’t want to live like that any more than I wanted to dread the credit card bill every month.

I needed to find middle ground.

April in the middle

I didn’t find that balance right away, of course. It took time to (mostly) make my peace with spending and saving. So today I thought I’d share what this more balanced approach looks like for me.

Here are my spending guidelines and how I approach spending these days:

  • I only spend money I have — meaning, no credit card balances … ever. I pay off my rewards card at the end of every month. This action alone alleviates a ton of money-related stress.

  • I spend guiltlessly on things that are important to me. For instance, I greatly value my family’s health. So I’m okay with the fact that we pay a lot for grass-fed, organic what-have-you. I’m okay with our gym dues and paying for yoga classes. It feels good to spend money on the things we value.

  • We indulge sometimes. I like the Balanced Money Formula a lot, which leaves room for indulgences like eating out and, in our case, hiring a housekeeper to clean our house twice a month. Uber-frugal me would never, ever, not in a million years, hire a housekeeper. But it is actually more affordable than I thought and, for me, it’s been life-changing. Between cleaning sessions, the house requires very little upkeep, and this means we’re always ready for company. I enthusiastically pay my housekeeper. She’s amazing.

Here are my saving guidelines and my more balanced approach to saving money:

  • We have an emergency fund. Right now, it would get us by for at least a year. That’s probably a little too much for an emergency fund; but we sold some land recently, and I still need to figure out what we’ll owe in taxes and then set that aside and move the rest of the funds.

  • We contribute to Roth IRAs. Knowing that we’re saving for retirement and that we have an emergency cushion helps me feel less guilty about spending money elsewhere. I don’t have to worry about what we can spend if we take care of savings first.

  • I comparison-shop for the bigger stuff. If it is an expensive purchase, like the refrigerator we had to buy last year, I spend a fair amount of time sorting through reviews, looking for the best deals, and Googling coupon codes. But researching like that for something like a $12 carafe? I have to let that go. It keeps me more sane.

  • I do a quick gut-check. Before I buy most things, I take a little timeout. Do I really like/need/want this? Do I already have something that works just as well? Could I make it myself? For instance, I recently planned a baby shower for a friend. I saw these neat tissue paper tassels I wanted, but they were $30. Spending $30 for something I wouldn’t reuse bothered me. So I Googled “how to make tissue paper tassels,” and I made my own in about 30 minutes with an extra $3 worth of supplies.

  • I lower our bills as much as possible. I love to save money on property taxes, insurance, cell phone plans, and other expenses that I can lower without feeling a pinch. This also can include things like cutting subscriptions and memberships you no longer use and refinancing your mortgage when rates drop.

Of course, this is just what works for me, and one of my favorite GRS tenets is to do what works for you. You might be more frugal than I am; and if you are perfectly happy that way, that’s great! I’d probably be envious of how much you save. Or maybe you think protesting your property taxes is a waste of time, and you’d rather focus on increasing your salary. I wouldn’t necessarily disagree.

So, readers, let me know in the comments: Have you ever been at a spending or saving extreme? What does balance look like to you?

This article is by staff writer Lisa Aberle.

The older I get, the more complicated my life gets — and the harder it is for me to make decisions. Do we have anything in common there?

By far, the most complicating factor has been having children. Not that that’s a bad thing. It’s not bad, just … complicated. And since we just added another child about two weeks ago, we’re adjusting to less sleep and more laundry. So kids = sometimes hard decisions. For example, here are a few of the decisions that we’ve considered since having children:

But the decisions extend beyond money, too. How do we manage our time? In the middle of adjusting to a newborn, we are still in the middle of a huge remodeling project on our fixer-upper. What sane person decides to replace the siding, windows, wiring, and insulation in the middle of major life changes? We are doing it, but our sanity should be questioned.

Anyway, so I find myself a little overwhelmed with making the best possible decision for my (and my family’s situation).

Enter Decisive by Chip and Dan Heath. The subtitle of the book is How to Make Better Decisions in Life and Work. If that doesn’t sound like what I need (and maybe you, too?), I don’t know what does.

I loved the book and wanted to share a few things I learned from it.

Agonizing over decisions?

The authors describe four “villains” to decision-making.

  • First, we define our decisions too narrowly. For example, as we were preparing to have children, I first asked myself: Should I quit my full-time job or keep it? Two options. The authors say that often, we should be asking ourselves broader questions and broadening our options. Should I stay full-time? Quit completely? See if working part-time is a possibility? Maybe my husband should cut his hours or work from home two days a week.
  • Second, we — all of us — suffer from “confirmation bias.” As they discuss in the book, “Our normal habit in life is to develop a quick belief about a situation and then seek out information that bolsters our belief.” Uh oh. So we deliberately seek information that supports what we think already, huh? We think we’re making good decisions, but we probably aren’t making the best decisions if we unconsciously sought what we wanted anyway.
  • Third, short-term emotion affects our decision-making abilities. Sometimes we need to detach ourselves from the situation to gain some perspective.
  • The last villain is overconfidence or assuming that we know more than we really do about what the future holds. This is one that some readers took issue with when I wrote about our smaller retirement savings. Just because we think we’re doing okay doesn’t mean our retirement savings won’t be obliterated by an accident or disability.

Decision-making tips

So how do we make smart decisions anyway?

  • To counteract the narrow framing, widen your options. Are there more than two choices? Is there a better way? And another way, take away all current options and force yourself to think of new options. But don’t have too many options. Studies have shown that having too many options doesn’t improve the decision-making process. You can also look for others who have already solved your problem. One of my favorite things they recommended was looking at yourself when you did do things well. For instance, if you had several days in a month when you didn’t spend money impulsively, analyze what was different about those days compared to the days you did spend impulsively.
  • For confirmation-bias, you need to test your assumptions against reality. Instead of looking at the option you want, you may want to consider the opposite — or find someone who disagrees with you. They also discuss zooming in and zooming out on certain situations. By zooming in, we’re looking at a close-up, and by zooming out, we’re taking more of an outsider’s perspective. And I learned a new word by reading this book: “ooching.” “Ooching” means to test your hypothesis by creating a mini-experiment. A swimming example is to dip one toe into the water to test it before diving in.
  • Find a way to become detached from your short-term emotions. Another excellent strategy they offer is the 10/10/10 strategy. When faced with a decision, ask yourself how you will feel about your decision 10 minutes from now, 10 months from now, and 10 years from now. We like what’s familiar to us, so even though not all personal finance advice is applicable to us, we are more comfortable with what we’ve heard most often. To combat this, try looking at the situation from the perspective of an uninvolved observer (or, think about what you would tell your best friend to do if she were facing a similar situation, and why). Think about your priorities and honor them.
  • Since no one can know the future, prepare to be wrong about the future. The authors talk about a tripwire, something you put in place that causes you to evaluate past decisions. I think this one may be particularly valuable in past financial decisions, because it prevents status quo. To prevent overconfidence, they mention considering a range of possible outcomes, both good and bad: What’s the worst thing that can happen? What’s the best? A premortem is to consider that your decision has totally tanked. By asking yourself why your decision was theoretically a bad one, it forces you to face your overconfidence.

This book was full of interesting stories and case studies. I found its premise to be very helpful as I personally navigate a lot of important decisions.

Do you have any tricks to avoid decision paralysis? Do you think you make good decisions generally and, if so, how do you think you accomplish this?

This article is by editor Linda Vergon.

It used to be part of everyone’s existence, like going to the grocery store once a week. You’d stand in a teller’s line and hope everyone in front of you had uncomplicated transactions. Then you’d hand over your cash and the teller would stamp your passbook to record your deposit. It all felt very solid and respectable, even sort of fun knowing you were adding to your savings.

When we moved to rural Washington, the nearest branch for the big bank where I had my accounts was 70 miles away, so I opened an account at the local bank too. It was an entirely new experience for me, going to the bank in our little town. I’m certain that the tellers were on a first-name basis with all their customers, and it didn’t take long for us to fit in and enjoy the social interaction at the branch too. In fact, we still have the branch manager’s mobile number on our cell phones.

Now that we live in the big city again, it’s actually been five months since I stepped foot in a bank. The last time was in March, and I only went because I needed to give the bank my new address – for my safe deposit box that is housed in another city. Apparently client information for safe deposit boxes at my bank is still handled the old-fashioned way. Otherwise, I could say I almost never go into a branch.

In this environment, I much prefer to conduct my banking online – day or night, from my computer. When I went in March, I actually thought I’d have to take off work to conduct my business; so I checked online for the location and hours to plan my visit. I was surprised to find that they were open even though it was 4:00 p.m. on a Saturday. (Definitely not the bankers’ hours I remember.) I decided I would just go to the bank on my way to the grocery store that day so I didn’t have to take time off from work.

We talk a lot about the convenience of online banking at Get Rich Slowly. And I get that not everyone has a computer. (Heck, not everyone has a bank account!) But I have to admit to being surprised that there were actually people at the branch. I mean, it’s not like I had to fight for a parking space – and the customers were outnumbered four to one – but that’s not where we go for social interaction in the big city, so were they all dealing with their safe deposit boxes? I think not.

It’s obvious that some of us still need to visit a branch every so often. But when I live in a large metropolitan area, there’s virtually no reason for me to visit a branch when I can transact all my business and even open a new account online. I think, overall, that we’re moving away from needing brick-and-mortar institutions, but I also think we’re sort of just at one point along a continuum.

If you look back at how other banking products like automated teller machines (ATMs) and debit cards were introduced to the public, there was a tipping point beyond which you could say, yep, this is the new norm. Where do you think we are with online banking? Is it now the norm? How long has it been since you went to the bank? Is there another way to measure the tipping point?

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