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The Value of Being Frugal

Posted December 15th, 2008 in General

I’m an avid amateur photographer. While searching for some digital photography equipment specs many years ago I ran across Ken Rockwell’s photography website here.

Ken has dedicated himself to evaluating and testing both Nikon and Canon bodies and lenses, as well as software and related post-processing equipment for the general public. More importantly, however, he’s written several articles that dispel many common notions and misconceptions amateurs and serious photo hobbyists have, some of the most notable (and sometimes controversial, depending on whom you ask) being “Why Your Camera Doesn’t Matter”, “Photography Is Not A Spectator Sport”, and “The Seven Levels Of Photographers”, to name a few.

So what does Ken Rockwell’s photography website have to do with California mortgage loans and real estate?

Whether you agree with Ken’s opinion on photography and art-related subjects (I do), his January, 2008 article, “How To Afford Anything” is one I’d encourage anyone to read who is serious about living within one’s means–especially in times of recession.

While the basis of this op-ed has to do with how he himself manages to afford to purchase the equipment he both owns and tests, he discusses some specific pitfalls of consumer spending many of us are guilty of that literally undermine our ability to live a stress-free life. Unmanageable debt spending itself is the primary cause of divorce, bankruptcy, and foreclosure, and what I believe has the capacity to end our days as an international economic superpower if we don’t stop burying ourselves in consumer debt.

Apparently I’m not the only one who found Ken’s article both poignant and relevant; the founder of Kinko’s, Paul Orfelea, also saw enough merit in it to link to it from his own blog entry entitled Rainy Day Role Models. The rest of Mr. Orfelea’s blog is worthy of your time as well.

I will say this, however:

There are a couple of subtopics in Ken’s article about living frugally that deal with the cost of owning real estate, and references to the plight of California homeowners who are now homeless (he contends this is due to indifferent real estate agents and unscrupulous mortgage lenders).

I respect his right to state his opinions, but he’s an expert in photography, not mortgages or real estate investing. He does not discuss the after-tax benefit that owning real estate provides, which is tangible and significant. And you should not conclude from his assessment that owning a condo is better than a single family home for purposes of saving money under all circumstances. Condo ownership might make sense if you’re able to purchase at a significantly lower price than a single family dwelling, but condo ownership also involves paying non-deductible monthly association fees, and interest rates on condo loans can be higher as well. Condos are subject to litigation matters that can affect all property owners, and can be more difficult to sell quickly than a SFR if necessary. And, as anyone who has lived in California for very long will attest, there can sometimes be very little difference in the cost of premium condos versus SFRs in many metro-urban areas.

His other assertion — that greedy real estate and mortgage brokers are the reason thousands of Californians are now homeless — isn’t a result of independent thinking. It’s restating TV news and reruns of Congressional finger pointing sessions with the former heads of Fannie Mae and Freddie Mac. Disappointing, given that Ken is otherwise known for his objective methods of evaluation and comparison — at least with photo equipment. A little of the same thought process and education beyond the street level might enable him to render a more intellectual argument, one in which he realizes that no one can stop someone else from having what he truly wants, even if it’s not in his best interest to have it.

Most people are without adequate life insurance, a living trust, a proper will, and lack proper financial planning, even though it’s generally accepted that these are issues that are up to us as individuals to address. If it’s true for these issues, the same accountability applies to the choices homeowners make when it comes to purchasing and financing real estate. This doesn’t alleviate the real estate and lending industry from seeking to educate and help consumers make informed choices, but it’s simply not acceptable to scapegoat these vital service providers when consumers choose to have now and pay later.

Nevertheless, if there’s one thing I think Ken succeeds in hitting home is that we as individuals and families need to learn to be happy with what we already have and quit caving to the compulsion to add “more”, “better”, and “bigger” to our already over-materialistic lives. If we can do that we’re able to experience what it means to be truly free — and that’s to have some residual cash after paying our bills, a little more socked away for retirement, and owe nothing to anyone else except our time, attention, love and care.

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