Just because everyone else is willing to pay for it doesn’t mean you should too.
Just because something is normal doesn’t mean that it’s right. This is particularly relevant when assessing one’s financial situation. Household debt is at record highs in the U.S. and Canada, mainly because people are taking on debt to finance lifestyles that are beyond their means. An article in The Simple Dollar cites a Pew Research study that found “only 46% of Americans earn as much or more than they spend each month.” This is astounding, but indicative of our society’s willingness to uphold a personal image at all costs.
If you hope to get ahead financially, you will have to fight against the urge to “keep up with the Joneses.” While you may admire your friends’ new cars, their big houses, their luxurious annual vacations, what you’re not seeing is their credit card statements or their minimal retirement savings, nor are you witnessing the very likely fights about money that occur behind closed doors.
In order to avoid falling into such lifestyle traps, take time to analyze carefully the true costs of many ‘normal behaviors’ and think about whether or not they’re necessary for you. What follows are some common costly choices that can be pared down, as well as some advice on how to stick to those choices.
1. Question the following:
Do you really need a big house? What’s the smallest amount of house you need? Don’t fall into the trap of thinking you should buy as much as house as you can get financing for; think about renovations, maintenance, heating, cleaning, furnishing, and more.
Do you really need a nice, new car? Do you even need a car? As the only couple driving the two oldest cars out of our entire friend circle, my husband and I understand the desire to buy a new car. But why? A new one would serve the exact same purpose as our old cars, while adding new payments to our lives. It doesn’t make sense. (Read: Why you shouldn’t buy a new car…ever)
Do you really need a diamond engagement ring, a big fancy wedding, an expensive honeymoon? Jon Gorey delves into the sticky issue of equating spending with love and explains the illogical assumption that diamonds are somehow indicative of one’s commitment. He cites Rohin Dhar in Priceonomics:
“The next time you look at a diamond, consider this. Nearly every American marriage begins with a diamond because a bunch of rich white men in the 1940s convinced everyone that its size determines your self worth. They created this convention – that unless a man purchases (an intrinsically useless) diamond, his life is a failure – while sitting in a room, racking their brains on how to sell diamonds that no one wanted.”
Do you really need to upgrade your devices? Why can’t you use an older model phone or laptop for a few more years, if it saves you $1,000 or more? Question what you would do if nobody ever saw your device; examine whether or not your desire to upgrade stems from wanting to impress others or because it actually serves a purpose your old device cannot.
Do you need pets? Do you need kids? Do you need to go to college? (If you graduate, it usually makes financial sense, but if you don’t complete it, you’re accumulating senseless debt.) These are tough questions to ask, but the point of the exercise is to think consciously about decisions we all too often take for granted.
2. Make a list of life goals.
It is helpful to create a list of things you want to accomplish within the next 1, 5, and 10 years. Where do you want to be — physically, professionally, emotionally, socially, financially — and what will it take to get there? Realize that, in order to accomplish these goals, you may need to pare down key aspects of your life now. It will seem like hard, painful work at the early stage, especially if you’re having to turn down invitations for fun with friends, but by the time you reach those goals — owning your home outright, being able to retire early, etc. — the Joneses will be wishing they could keep up with you!
3. Stay on track.
Equip yourself with the necessary tools to ensure success. One major yet often underestimated influence is social media, and how it drives people to spend money because there is pressure to keep up with others’ lavish lifestyles. Stay off social media as much as you can, or repeat a mantra to yourself whenever you feel tempted: “How nice for then, but I can’t afford this right now.”
Set a budget. Create a spending plan that is your road map to achieving those life goals you’ve set. Again, from The Simple Dollar, some good practical advice:
“The 50/30/20 budget works for a lot of people: Spend no more than 50% of take-home pay on essentials (housing, food, etc.), 30 percent on wants and 20 percent on saving (debt service, putting money away for emergencies or retirement).”
Get friends or family to hold you accountable. Find a friend group whose views you share. Talk about your goals, your self-imposed frugality, your struggles. I really think that more people want to live like this, but don’t know how and could benefit greatly from some support.
It takes a certain courage to go against the ‘normal’ flow, to stand up and say, “These financial choices don’t reflect my own values and I’m going to forge my own path.” But you can do it, and you will thank yourself at the end of it all, long after those swanky houses and cars have lost their novelty and luster.