Some of us have been guilty of this — keeping up with the Joneses, the Smiths, the Clarks or any other family who seems to have it together on your block. In some cases, we’re trying to keep up with the Kardashians through their lavish family lifestyle shared in every possible media channel.
You may not be the jealous type per se, but if you work hard and earn decent money, but can’t seem to get ahead, you might wonder: what am I doing wrong? how are they affording bigger homes or taking vacations? wondering how the can drive fancier cars?
In my first published book, You Only Live Once, I wrote: “keeping up with the Joneses is trying to live someone else’s life instead of spending your money building the life of your dreams.”
A self-evaluation and a review of your money habits are one of the best ways to get your personal finances on track and improve your money. Maybe the people living a seemingly “good life” are making smarter decisions with their money, and you might be able to learn a thing or two from these people. But oftentimes, it’s the complete opposite and the “good life” that the Joneses enjoy is nothing short of a facade.
From the outside, they’re the family everyone wants to be. But if you pull back the curtains and review their finances with a fine-tooth comb, you might discover a few dirty secrets and realize you’re better off than they are.
Here are reasons why you shouldn’t struggle to keep up with the Joneses:
Up to their eyeballs in debt
The people across the street might be the financial envy of everyone on the block. No matter how bad the economy becomes, they always land on their feet. However, before you praise them for beating the odds, there’s a good chance that your financial role models are up to their eyeballs in debt.
According to 2018 statistics regarding American household credit card debt, the average household with at least one credit card has an outstanding balance of $16,883. The people who live across the street or next door could belong to this group of swipe-happy Americans. It’s not that they’re earning significantly more than you or that they’re making smarter decisions with their money, rather they could be choosing to finance their lifestyle and give the illusion that they’re doing exceptionally well.
Here’s a pro tip: Are you like these indebted joneses? Consider consolidating your credit card balances and follow a debt repayment plan to get rid of debt forever.
Big home and house broke
Some people don’t understand the concept of living below their means. If they have the income to afford something, they’re buying it without any thought or consideration to disposable income. The truth of the matter is some of the people you admire are “house poor.” This phrase refers to those who spend much of their income on house payments and have very little money left for anything else.
It can be nice going home to a big fancy house, but stressing about affording the other necessities of living, can make your home feel like a financial prison.
Ideally, house payments should be no more than 28% (30% with an FHA home loan) of gross income, yet some people have rent or mortgage payments as high as 40%. They’re able to live in a nice beautiful home, but they might struggle to pay other expenses, such as the energy bill and insurances.
Here’s a pro tip: Make extra money to pay down your mortgage or refinance for lower payments. You might also want to think of downsizing.
An empty savings account
Unfortunately, when you’re house poor, there’s often zero disposable income for building a cash reserve. Financial experts have always preached the importance of paying yourself first. Some even recommend saving 20% and living off 80%. With this 20%, 10% can go into an emergency fund and the other 10% into a retirement account. But if all your money goes to your house payment and there’s barely enough money to put gas in your car or food in the refrigerator, saving is probably a far-off idea.
According to a 2018 Federal Reserve study, approximately 44% of Americans don’t have $400 to cover an emergency expense and would borrow or selling something to make the money. Over 44 million people don’t have an emergency saving at all.
So, if the neighbors across the street have a big home and luxury cars, but no cash in a savings account, consider yourself fortunate and richer if you have a nest egg.
Here’s a pro tip: start saving money for an emergency fund each payday. Have a goal of 4-6 months of living expenses. Consider creating a $1000 rainy day fund too. While emergency funds help you cover living expenses during periods of unemployment or underemployment, a rainy day fund can help you weather the unexpected expenses. Things like a flat tire, medical bill, or HVAC repair.
Keeping up with their Joneses
Keeping up with the Joneses is a vicious cycle that never ends. Here’s the thing, the same way you’re trying to keep up with the people across the street, this same family might be trying to keep up with another family themselves. Basically, as you try to keep up with your Joneses, they are constantly trying to acquire things to same at the same level as their Joneses. You’re both running the very same race–and no one wins.
Instead of worrying about other people and their money, you only need to be concerned with your income and improving your own personal finances. If you allow other people to control how you spend your money, you’re never going to get ahead and you’re never going to reach your financial goals.
Remember, everyone has a struggle. Even if the Joneses struggle isn’t financial, it could be other issues, such as health problems, family problems or employment problems. They might be a step ahead in the money department, but you may have joys they’ve yet to experience.
Here’s a pro tip: Create a vision for your life and set financial goals that align with your values.
Consuming doesn’t bring real happiness
Research has long proved that over-consumption doesn’t bring happiness. And if you’re working harder to get what everyone else has, this isn’t going to bring true happiness or satisfaction. If anything, the determination to keep up adds to your financial worries.
If you think you’re stressed now because you’re feeling like the loser on the block, imagine how you’ll feel once you’ve maxed out your credit cards because you’re financing furniture, clothes, home improvements, and vacations — just to give the impression that you’re on the same level as others.
Additionally, if you were to lose your job or have an emergency, think of the stress you’ll experience from not having enough in your emergency savings, primarily because you spent all your disposable cash maintaining an image.
Here’s a pro tip: Spend on what matters most to you. Take time to clarify your values and spend accordingly. You work way too hard to spend money just to impress others while stressing yourself out.
If you’re looking for a financial role model, look to those who spend their money wisely. These people may not live in the biggest houses, drive the nicest cars or take the most exotic vacations. Rather, they have zero debt – or very limited debt – and they have emergency savings and rainy day funds. Most importantly, they’re content with what they have and how much they earn, and they don’t feel the need to keep up with anyone.