Hi everyone, this is Dan Thompson and welcome to another wise money tools video. So I read this interesting article the other day about the economy, said in the 2010s, the national unemployment rate dropped from a high of 9.9% to its current rate of just 3.5%. And then it said the economy expanded each and every year in that decade. America's confidence in the economy hit its highest point since 2000. Right before the.com bubble burst. Well, that's kind of a scary thought. If you live through the.com bubble burst. Don't want to do that one again. So these are pretty typical numbers for a prosperous economy, right. However, prosperity interestingly enough can also bring with it other financial issues. So for instance, one thing it can bring is lower interest rates. Now, who doesn't love low interest rates, right? It allows people to buy a bigger home, they go out and finance cars, all kinds of things. But along with the ease of interest rates is also the cost of living.
And that becomes quite a paradigm. Think about this, when you put your money into a checking or a savings account, what kind of interest are you getting on those right now? Yeah, pretty much nothing, maybe a half a percent. And then there's a lot of seniors who live on fixed income type investments, bonds for instance, fixed annuities, and CDs. They're not getting the interest that they would normally get or have gotten in the past. And as a result, their incomes been a little bit damaged as well. And then here's what's really strange, especially with the economics looking so good. Why is it that only two in five people can come up with $400 in case of emergency, two in five people, in fact, one in four adults struggle paying their bills each month. This might be why, you know, a surprise furnace repair bill or a parking ticket or you need some car parts or medical expense can almost ruin so many American families, despite all the wealth that this country has been able to generate, and how can that be? I mean, wages are up, profits are up, people are working, unemployment's down.
So what's the problem? Why are so many people still struggling? Well, there's a couple of reasons. One is, they don't live within their means. So they're not budgeting. And I don't really like that word budget. I personally don't like a budget, but you have to live well within your means. The only way you can be out spending is if you're also out saving. And I remember way back, I remember thinking, well, if I'm gonna have a car payment, I need to also be able to save that much money too. So I would say, Well, my car payments gonna be $200 a month. I have to be able to save 200 a month or I'm not gonna buy that car. If that car payments 500 I better be able to save 500. The problem is we don't do that we live on paycheck to paycheck, living expenses, and will max out car payments and house payments and credit cards and everything just to barely squeeze under our monthly needs.
We can't do that. So that's number one. Just because prosperity up is up does not mean that we're doing great because if we're spending everything we're bringing in, that's not helping us. The other thing is cost. See prosperity when it's on the rise and interest rates are low. You know what happens? Oftentimes, the cost of things, particularly housing increase. It's a supply and demand kind of thing. Housing is one of the most expensive parts of a family's budget. And as housing costs rise, the cost of living rises. And unless you're willing to get less house then maybe you want or you need, you're probably gonna struggle making ends meet. If you're trying to max out that house payment, get all the house you can possibly get in your budget. It's probably gonna mean you're not gonna be able to save quite as much as you need to. And some areas of the country are obviously worse than others. You know, in San Francisco, this is crazy to me, the average home is now 1.6 million.
So and that's we're talking about a small home we're talking about 15000, 1800 square feet, you're gonna pay 1800 dollars per square foot in Manhattan, which means a 1500 square foot home is $2.7 million. Now those are the two coasts and those are probably the extreme areas to live in. But still housing costs are rising faster than wages and almost 80% of the country. Then we add to that healthcare costs rising, and it can be a double whammy for a lot of families. Now, wages have gone up, they've gone up on average about 20%, which is great. But if healthcare premiums have gone up, let's say, you know, 25 or 28%, you're not really keeping up. Now, I get frustrated with health care, because it's so regulated. But it's because of that regulation that costs keep rising. Now I understand we have to have some regulation because unfortunately, there's a lot of unscrupulous people out there, but we live in one of the most productive and innovative countries technologically advanced in that, you know, literally the history of the world.
And in nearly every competitive industry costs go down and or benefits go up or maybe mistake the same. I mean, just take a look at technology. I remember way back in the day when I first started in the mid 80s. I remember having to buy my first computer, it cost me 1800 dollars. But the problem is, it didn't do hardly anything, maybe a little word processing and printing on a dot matrix computer, which means it's just a bunch of dots. It didn't even have a very good font when it was all said and done is basically just a glorified typewriter. But if you fast forward 30, 35 years, you're still probably gonna pay about 1800 dollars for a new Apple Computer, let's say but look at what you get. I mean it basically does everything for you the and the colors and the music and everything that you can do. You can edit the you know, full scale movies on your apple. And you really can't live without them, right? And we've gotten so used to them.
But the point is, costs really didn't go up. But we got so much more for our money. And that's again, because of competition and innovation in technology. It improved the entire industry. Take a look at cars. At the same time. Obviously, they're getting more expensive, but we get so much more for our money. I mean, we're even getting to the point where cars can drive themselves, they help prevent accidents by using braking control, not to mention all the convenience and the electronics that you get. It's so funny that on a personal note, I love the big huge screen and the Dodge Ram and I needed to replace my truck. So I joke that people say well what did you end up buying? And I say Well, I I bought a big screen with a truck wrapped around it. Because I love that kind of technology is kind of fun. Anyway again, Competition, innovation, technology all have improved the automobile industry. And one thing that holds car companies back oftentimes are the burden and the costs of more government regulations.
Now, some are good again, some not so good. I think both college education and health care could be part of this innovation. Interestingly enough, what does the government have it's fingers in the most college education and health care. So it's so much regulation and government intervention and little competition, you can see what the results can be. Housing has it's own unique set of circumstances. There are two factors that we have to at least look at and consider when it comes to housing. One is supply and demand. Now, if I go back to San Francisco, Manhattan, you know, big cities like this. They basically have a, you know, moratorium on building. You can't build any new homes. So there's you just have to be able to buy what's there. And oftentimes, even in other parts of the country, there's no really building going on, there's nowhere to build and where there are fewer homes that are needed or wanted cost naturally rise, bidding wars happen and people have to be willing to pay more as those prices rise.
The other factor is low interest rates. When interest rates are low family can buy more house for the money. Since the mortgage companies are encouraging you to always max out your potential mortgage payment, lower interest rates, lets you buy more home. This though in turn, drives up prices right? And then the third thing to take into consideration is location. You know, they say in real estate, it's location, location, location, right? This factor can drive prices up as well if you happen to live in a location where a bunch of other people want to live as well. So those were extenuating circumstances. But, again, since housing is a substantial family cost, these rising home prices have made prosperity difficult for many families. So although prosperity is not a bad thing, it's a good thing. And although wages are going up, and although the economy is doing well, there are a few things that families still have to do.
And as I mentioned before, number one, they've got to live within their means. Okay, by doing that, you can get to number two, be a saver. Save As soon as you can, save as much as you can, let compounding and time be a huge wealth builder for you. Number three, don't let debt rule your life and your choices that you can make. When you're in debt. You have very little choice but to just go to work and keep paying the bank and the credit card company's. Debt is a burden to anyone living within it. Now, this goes back to a video a few weeks ago, you still need to be saving even if you have some debt, you can't miss out on those compounding years. However, best rule of thumb is to don't go in debt. And if you are going into debt, go into debt and in a small enough fashion that you're able to continue to save and invest along with it. Look, not many people have the capacity to go buy a house for cash. But that doesn't mean you have to buy a house that maxes out your mortgage and puts you in debt where you can't even save another dime.
Number four, you might consider health care plans that are outside the traditional insurance plans. There's several of them, and I know some of them are more Christian based plans and they're not gonna cover issues that you might have with some vices. Alright, but they cover the essential And they can do it at a much lower cost. And then again, number five, like I was saying, Don't max out your mortgage, find a home that's workable, but allows you to save your money at the same time, don't become house payment port. Number six, plan and save for things. Don't use debt as part of your plans. But again, you must be saving at the same time, long term investment stuff, stuff that's going to grow and compound and build your wealth. And then number seven from the last video, be wise when it comes to education for your kids college. Oftentimes families sacrifice their future retirement to pay for kids college without letting them have the opportunity. I say to letting them have the opportunity to figure it out for themselves. And they will, if you can encourage your child to be innovative and figure out a way to pay for their college.
I don't know how they do it. But somehow they figured out, that's a great start to some general concepts to live by. And even though the economy is progressing, and some may not feel like they're progressing, you can see why. And there are some things that you can control. And as we've talked about before, Einstein created this simple equation for wealth, y=a(1+r)x. And it basically means this wealth is what we're after, is attained by number one, paying yourself first. Number two, starting right now, then you got to protect your money from losses. You've got to compound your money each and every year. And then using exponential growth, by using secured leverage to accelerate your returns is the way to really build wealth has safely and predictably as you can. If you can do this, you're going to also enjoy the things in life. Wealth will be attainable, and anyone who understands it can attain it.
You know, when it comes right down to it, nothing really controls you or your wealth, except for three things. You got to understand it, you got to know how it works. Okay? Then you got to live within your means so that you can be a saver. And then number three, you just got to take action. You got to get started today. Sounds simple, right? I like to say it's simple. Not necessarily easy. Well, let me make it easy for you. Okay. All right. That's it. Well, if you have any questions, shoot them to questions at wise money tools.com. Answer them just as quick as I can. You can also put some comments below. Don't forget to subscribe. And if you ever want to take a few minutes and talk about your situation, click on the time trade link below. Well, that's it. Hope you enjoyed it. Take care.
