Don't follow the Joneses

Too many people spend money they earned to buy things they don’t want to impress people they don’t like. — Will Rogers

Fitting in and belonging are core needs for most human beings. They are particularly important during high school and college when we are at the age where we are finding ourselves and identifying our tribe. It is also the time where we are most susceptible to peer pressure as our own sense of self is just being formed.

One of the ways that people try to fit in is to buy things that attract attention and impress others. For example, expensive sneakers or the latest phone when we’re younger or fancy cars and expensive homes as our financial means increase. While it’s perfectly fine to get things that you like which attract others’ attention, many people take this too far and fall prey to the phenomenon called “Keeping up with the Joneses”: the need for middle-class and upper-class people to follow the herd in terms of their social responsibility and lifestyle (English-grammar-language-lessons.com).

Keeping up with the Joneses is a trap I would definitely recommend you avoid as it can be devastating to your finances and your health. As the quote at the top of this post says, too many people spend their hard-earned money buying things they don’t want just to impress those around them. While buying unnecessary things sounds innocuous, there is a substantial share of folks in this country whose spending leads them to live paycheck to paycheck, even amongst those who have very high incomes. The latest research released by Lending Club corporation in the 12th Edition of their Reality Check: Paycheck-to-Paycheck report shows that:

• 61% of Americans were living paycheck to paycheck in June, 2022
• The biggest rise in paycheck-to-paycheck consumers was in consumers earning between $100,000 and $150,000, up 11 percentage points from May 2022 to 52% in June 2022.
• 36% of consumers annually earning $200,000 or more lived paycheck to paycheck in June

This really matters as living paycheck to paycheck can take a big toll on your health. Research from the American Psychological Association shows that money and finances have remained the top stressor since our survey began in 2007,” says APA CEO Norman B. Anderson, PhD. “Furthermore, this year’s survey shows that stress related to financial issues could have a significant impact on Americans’ health and well-being.” There are many articles which show the impact from financial stress on both physical and mental health, for example this one titled Most of Us Live Paycheck-to-Paycheck. This Is What It Does to Your Health by NBC News or this one on Medium from David Shorb Titled The Mental Health Impact of Living Paycheck to Paycheck. Nobody should want to subject their minds and body to the impact of excessive financial stress.

There are some simple ways to prevent yourself from falling prey to Keeping up with the Joneses.

• Start by prioritizing what’s truly important to you. This will require some introspection, but make an effort to figure out and prioritize the things that are truly important to you. Is it the latest phone, sneakers or the neighborhood where you live? It’s OK to have interests and things you care about, but you should have an understanding of how each of them relate to each other. For example, if you had to make a choice between a new phone or a new pair of sneakers, which would be more important to you? By consciously determining your prioritization, and then focusing your spending on only high priority categories you avoid the problem of buying things you don’t personally want just to keep up with the Joneses
• Build out a budget and have an explicit line item for discretionary expenditure: Much of the expenditure which leads to the paycheck-to-paycheck circumstances for many Americans is discretionary. By building out a budget which explicitly details how much you can spend on discretionary items, you make it easier on yourself to determine up front whether an expenditure fits within your budget. Having pre-set lines that you don’t cross helps in those tough moments when someone asks you to spend money that you shouldn’t be spending. If it’s beyond your budget, the answer is no
• Learn to say “NO”: This is a very important skill in life as you’ll always be asked by others to do things that don’t fit your budget or your life. It’s hard to say no to people as you don’t want to disappoint them or have them feel like you’re not a fun person. However, it’s a necessary skill. Learn some simple ways to say no that work for you and are socially acceptable and practice those so it isn’t so difficult in the moment. As you get older, you’ll realize that others will respect you for being able to say no as it shows strength of character and that you know what’s important to you

This completes today’s post on how to prevent yourself from getting caught in the keeping up with the Joneses trap. The practical steps you can start taking from today’s post are:

• Determine what’s really important to you: Prioritize your interests and wants so you can focus your expenditure on only those which are high priority
• Build a budget with an explicit amount for discretionary spending: Know your discretionary spending limit and stick to it
• Learn to say “NO”: Have the strength of mind to say no when you need to. Do it in a socially acceptable way, but make sure to do it

Thank you again for joining me on my journey to build financial literacy for young adults and their families. If you are interested in reading more of my posts, please access my author page (https://vocal.media/authors/sudhir-sahay) where you can see all the posts I’ve published. If you have any questions on today’s post of if there are any topics you’re interested in my broaching in future posts, please let me know. I can be reached at [email protected].