You’ve heard and likely used the expression “keeping up with the Joneses.” This expression was invented by Vet Financial Summit’s co-founder Dr. Meredith Jones’ great-great-grandfather.*
A recent survey, conducted by OnePoll on behalf of Wilsonart, sheds some light on the actual cost of keeping up with the Joneses.
It intuitively makes sense that it’s a lot easier to look at what people spend, than what they save or how they invest.
So we are more likely to say:
- “Honey, did you see the neighbor’s new Mercedes?” or
- “Wow, Joe and his family are going to Maui again!” or
- “OMG where did you get these cute shoes?”
Than we are to say:
- “Honey, did you see how much the neighbors have in their 401(k)?” or
- “Wow, Joe and his family are taking a vacation fully paid by their tenants” or
- “OMG where did you learn about this amazing investment?”
Of course, social media plays a big role in this tendency. When people post pictures from the beach, the top of a mountain or inside their brand-new car, it tends to create FOMO (Fear Of Missing Out). It’s a modern form of peer pressure.
So what are the financial consequences of this FOMO?
According to the study, over one-third of Americans and almost 50% of millennials spend more than they can afford in order to keep up with their friends.
Unfortunately, this can lead to a never-ending spiral of financial misery.
You keep up with your friends, who keep up with their friends, who keep up with high-rollers and celebrities. The end result: a huge win for companies advertising the latest must-have trends, and a complete lose-lose-lose situation for everyone else.
Think about what big brands have been able to accomplish through the power of advertising and FOMO:
- They’ve convinced some of us that wearing clothes that showcase their logo should cost more than normal, boring, generic clothes (or sneakers, or purses).
- They’ve convinced some of us that using a $1,000 phone, wearing a $10,000 watch or driving a $100,000 car is a status symbol. It makes you cool. Same concept as the Marlboro man years ago.
- They’ve convinced some of us that a torn-up pair of jeans should cost more than normal, boring, intact jeans.
Now, I don’t want to sound like a stingy, depressing, fun-hater Debbie-downer.
Splurging is perfectly fine.
Cranking up your rich-life dial – Ramit Sethi style – is fine.
Flying first class is fine.
Drinking a latte every day is fine.
Buying the latest iGizmo is fine.
But it shouldn’t be done to impress your show-off neighbor or your annoying brother-in-law – consciously or not. There is a ton of psychology at play here, whether we realize it or not.
Splurging should be done because you can afford it and it is truly what YOU want.
It seems like the current mantra of many people is:
- Spend as much as you have (or more, thank you plastic!) to maintain your standard of living and keep up with celebrities and friends. After all, you only live once, and you can’t take your money to the grave, right?
- Save whatever is left over.
- Invest for retirement when you finally get around to it… later… someday… maybe…
Call me crazy, but I tend to believe a wiser mantra could be:
- Save as much as you can.
- Invest as much as you can.
- Spend what you can afford so you can live your version of your “rich life.”
Ironically, if you follow this mantra, guess what? The Joneses might try to keep up with you someday!
Phil Zeltzman, DVM, DACVS, CVJ, Fear Free Certified
* Although Meredith Jones did have an amazing great-great-grandfather, he did not really invent the expression “Keeping up with the Joneses.”