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Hello, and welcome to Your Money 2.0. I’m Thomas Fox, Community Outreach Director at
Cambridge Credit Counseling. We’ve all heard about “Keeping up with the Joneses,” a
phrase that refers to a lifestyle notable for its measurement of success against our
neighbors’ achievements and, unfortunately, their possessions. You may be surprised to
learn that there really was a Mrs. Jones, who happened to be the author Edith Wharton’s
aunt. That Mrs. Jones made up for her years of isolation spent battling serious illness
by splurging later in life. In 1852 she built a 24-room villa in Rhinebeck, New York, that
quickly became the envy of her well-to-do neighbors, who began to build equally opulent
mansions of their own.
“Keeping up with the Joneses” can produce positive results, that is, if we’re striving
to earn the same good grades in school, or to advance within our profession the same
way our neighbors are. But if we’re merely struggling to duplicate our neighbors’ lifestyle,
and purchasing the trappings of that lifestyle with money that’s not really within our
budget, that’s a style we won’t sustain for very long. In that scenario, Keeping up
with the Joneses will lead to predictably disastrous results.
The desire to live beyond our means and keep up with the Joneses is one of the genuine
root causes of America’s current financial woes. As our neighbors buy newer and better
and bigger things, the temptation to keep pace is irresistible for many of us. When
we engage in this kind of spending, it’s not the possessions we’re after, of course.
It’s social status. Unfortunately, most people can’t actually afford to live that
way forever. As they increase their social status, they also increase their debt beyond
their ability to keep up with the monthly payments that result. Credit card delinquencies,
lawsuits, foreclosures, and bankruptcies are among the penalties that people pay for this
kind of lifestyle, but the good news is, if things haven’t gotten that far yet, we don’t
have to wait for an economic recovery to stabilize our situation. If you suspect that you’re
trying to keep up with the Joneses, there are a few steps you should take right now
to begin turning things around.
One of the first things you need to do is determine precisely what it is that motivates
you to spend the way you do. Begin by journalizing your spending for a few weeks – that is,
create a list of everything you buy over that time. Next, examine your list and ask yourself
whether each particular product or expense was entirely necessary, or was that specific
product bought just to have it? And please understand that we’re not talking only talking
about expensive cars or appliances. People who spend to achieve social status will often
pay more for every item in their budget – for sneakers and shampoo and lawn services,
for hot dogs and household cleaning products and wrist-watches, even when perfectly acceptable,
less-expensive items are readily available. Look again at each item on your list and put
a check mark next to each that you may have bought without considering whether it actually
fit in your budget, or because there was some social cache that came with it.
As you might expect, the next step is to look for alternatives to each of the small items
on your list that you overspend on, at least in part for status reasons. Replacing these
products usually doesn’t require much in the way of sacrifice, but you’ll need to
be on guard for feelings of depression or anxiety. Some people become upset at having
to face the realities of their budget, at having to settle for the second-best ice cream
or the store-brand trash bags. Don’t worry if you experience this sense of regret. In
time, you’ll probably re-discover the sense of satisfaction that comes from spending wisely.
After you tackle the small items, it’s time to examine the bigger purchases you make.
Technology is one area of discretionary spending that is easily reduced. For example in 2007,
one popular computer company introduced a cell phone that has revolutionized communication.
In less than four years, the manufacturer released four different versions of the popular
phone, each considered an upgrade, of sorts. Have things really changed so much in those
four years, or was the company simply practicing Business 101? If there is a need, it must
be filled. If there is no need, create one. In times like these, there are always going
to be newer versions of our current phones or laptops or televisions hitting the shelves,
but that doesn’t mean we have to drop everything and get one. Resisting the urge to buy the
latest and greatest edition of a product we already own will, in time, allow us to begin
to feel a bit proud of our frugality. That’s not a word that was in the Jones’s vocabulary.
Finally, like the social-status fixated neighbors of the original Mrs. Jones, it may be necessary
to look at your housing situation. Of all our bills, those connected with the home are
often the most expensive. Americans currently devote 34.1% of their budget to housing costs.
This includes rent or mortgage, utilities, housing supplies, and furnishings. Shelter
is important, of course, and committing such a large portion of our income to housing may
seem logical. But did you know that in the 1960s, Americans spent only 14.5% of their
budget on housing? Granted, there were plenty of variables that led to this dramatic rise,
but one of the largest contributors has been the expectation that we need to own a house,
that renting is inconsistent with living the American Dream. And it’s not just any home
we’re encouraged to buy, but the biggest home possible, based on our gross monthly
income – you know, the money we never actually have because taxes and other deductions are
made before the paycheck is cut. When you get a moment, you owe it to yourself to ask
what may be the toughest question of all – do I need this much house, or is there
something less expensive that satisfies my actual housing needs? In today’s housing
market, you may find there are plenty of more affordable alternatives. Contact a certified
housing counselor, and a local realtor, to determine if this is a good option for you,
and let the Joneses worry about themselves for a change. Otherwise, your possessions
will end up owning you.
Well, that’s it for this edition. As always, we welcome your feedback and ask for your
thoughts and suggestions by e-mailing us at yourmoney2@cambridgecredit.org. Thank you
for watching. Until next time, I’m Thomas Fox for Cambridge Credit Counseling.