The American Dream: A Fictional Story

September 23, 2011

Thanks to Danny Kofke, author of the book Live Wealthy With Little Money, for this portrayal of a family in debt.

Jim and Laura are a typical American couple. They just got married last year after dating for four years. Jim is a manager of a local department store and Laura is a school- teacher. They make a combined salary of $100,000 a year, and look forward to raises and increased incomes in their future. They have around $3,000 in their savings account— which seems ample since they are certain they’ll continue to make more money each year—and both drive new cars.

Spending Spree

Jim and Laura go shopping whenever they want and pretty much buy anything they like without thinking twice. In addition, they eat out most nights of the week but try to keep it cheap; they usually don’t spend more than $30 for these dinners.  

After renting an apartment for six months, they decide it’s time to buy a house.  Even though it’s just the two of them right now, they want at least a 2,000-square-foot house because children are on the horizon. Jim and Laura find the “perfect” house but it’s a little above the amount they wanted to spend.

Their Realtor® tells them that it’s not a problem. They can sign up for a five-year adjustable rate mortgage (ARM) and by the time it adjusts, they’ll have so much equity in their house they can just refinance. The housing market is strong and they’re confident their home will go up in value considering the prime neighborhood it’s in.

Both Jim’s and Laura’s parents live in much smaller homes but, after some talk, the couple feels they deserve this larger house because they work so hard and all their married friends are getting big houses too. Jim and Laura sign on the dotted line and their American Dream begins.

Never Enough Money

Fast-forward five years. Jim and Laura are now the proud parents of a little boy, James, and a girl, Sarah. After having James, Laura took eight weeks off from teaching to stay home and loved every minute of it. She wanted to stay home longer but they went through their savings on that 10-day Caribbean cruise before she got pregnant.

Laura began to feel very upset at having to send James to daycare but there was no way around it—they needed her check to pay the bills. Jim saw how unhappy she was and one night decided to have a talk.  It was very encouraging and they both agreed to make a change and start saving so Laura could eventually stay home.

This change lasted a few months before they started spending their entire paychecks again on things such as new clothes and dinners out.  Last year Laura had Sarah and was only able to stay home with her for four weeks before having to return to work. She now spends over half of her take-home pay on daycare expenses. Laura dreads going to work and hits the snooze button at least five times every morning because she hates getting up to face another day.

Jim is not doing much better. He’s had to lay off most of his salespeople. The raise he was promised every year did not happen. There are even rumors that his job might be the next to go. He’s started to look for other jobs but nobody seems to be hiring in his area of expertise.

Bad to Worse

To make a bad situation even worse, Jim and Laura’s five-year ARM is scheduled to adjust this year and their monthly mortgage payment will increase by $500.  The house has dropped greatly in value and Jim and Laura are underwater on their loan so they cannot refinance.

In addition, after James was born, Jim and Laura began to use their credit cards again with the promise of paying them off in full each month. That plan didn’t pan out and they now have $10,000 in credit card debt.

They both have a lot of trouble falling asleep at night and don’t feel optimistic about either their marriage or their future.  They have started arguing more and more—something they never did in the good old days—and these arguments usually concern their finances. What was supposed to have been their American Dream has turned into a scary nightmare!

Your Money

Not a pretty picture, is it? I hope your story is not like Jim and Laura’s but, unfortunately, I know a lot of people can relate to this couple in one way or another. The great news for Jim and Laura (and maybe you too) is that life allows us to learn and adapt and change.

Jim and Laura are obviously an example not to follow—but we can learn so much from them.  Many people don’t see the need to learn about money and how to manage it correctly. They bury their heads in the sand and don’t want to be worried about the true state of their finances because, if they did, they might have to change their spending habits.

The thing is, if you continue to make poor financial decisions, these actions will eventually come back to haunt you.  Even if you make $5 million a year but spend $6 million, you’ll wake up one day and find that you are broke. The great news is that it doesn’t have to be this way. We can educate ourselves, find examples to emulate, create goals and take action.


Editor’s Note: When Danny first contacted me I noticed he had already written one book “How to Survive on a Teacher’s Salary”.  So he’s definitely writing about an area where he has personal experience, trying to make ends meet on a small salary. 

My wife used to be an elementary teacher and it was interesting to see how teachers, making similar amounts of money, used that salary in different ways.  Some managed it well and never complained and some didn’t know how to handle their money and always seemed to be scraping the bottom of the barrel at the end of the month. 

So if you’re running dry at the end of the month and want a way to stretch your dollars farther, check out Danny’s book, Teach Yourself (and Your Kids) How to Live Wealthy with Little Money .


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Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn't like the other kids... His addiction to personal finance has paid off for his family and now he's helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.

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4 Responses to The American Dream: A Fictional Story

  • Mark

    I think that for a lot of people in this situation the problem is a lack of long term focus. Short term problems will always come and go, but we still need to be building for the long run. Retirement and non-retirement savings have to be built even as you’re strugging with the day-to-day finances. As those assets build, everything else will fall into place.

  • Kevin@RothIRA

    I think that for a lot of people in this situation the problem is a lack of long term focus. Short term problems will always come and go, but we still need to be building for the long run. Retirement and non-retirement savings have to be built even as you’re strugging with the day-to-day finances. As those assets build, everything else will fall into place.


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