Keeping Up With the Jones'

A new trend has emerged over the past decade according to what I’ve observed. We may be in an economic recession, but that hasn’t influenced people to spend their money more wisely. It seems as if a lot of people don’t understand that purchasing the things you want should only happen after you’ve made sure your monthly expenses are taken care of. The bigger problem that I see? People are more concerned with what other folks will think about them when they are considering making a purchase.

I’m 31 years old. I think that my generation is most at fault here although everyone seems to be on the bandwagon at least a little bit. Our parents are in their 50′s and 60′s now and have nice things. They’ve spent a lifetime setting money aside for retirement and climbing the corporate ladder and now they have large new homes, pricey cars, boats, campers, and expensive golf clubs. I’ve noticed a lot of people my age that have established successful careers are buying the same stuff their parents are buying. The thing that I don’t think they understand is that our parents acquired those nice things over the years instead of all at once. Now you have a situation where folks are so consumed by getting these nice, new things that they are over-extending their finances. Patience doesn’t seem to exist and the obsession with purchasing expensive items appears to be fueled by status or social class.

I’m going to use my father as an example of slowly acquired wealth and smart spending. He’s 54 years old and has been at his job for 28 years. During his career he has been promoted and received a substantial increase in wages and benefits as the years have progressed. When I was a kid we lived in a middle class neighborhood in a very small town and he had a respectable income. Once he was promoted it took a few years worth of raises to really make a big difference in his bring home pay, but he immediately started purchasing company stocks because management get stock matching from the company. As the years progressed his income continued to soar and the percentage of income he was using to purchase stocks increased. Now he is a little over a year from retirement and he’s sitting pretty. People see all of the nice things he has and think “He must make a lot of money”. My friends have made that very statement to me before. The truth is, he acquired things over the years. His last house was completely paid off before he sold it and he had invested a large amount of money doing upgrades to increase the value. When he sold that house he had a 6 figure down payment to go toward his next house. Now he lives in a newer, higher priced neighborhood in a reasonably sized city yet his house payments are a few hundred a month less than mine and his house is worth 3 times as much as mine. He’s got an extremely nice pickup with thousands sunk into upgrades, but it is 8 years old and he’s just taken extremely good care of it to keep it in great shape. He’s got the camper, boat, 4 wheeler, large collection of tools, incredibly nice back yard, etc. The thing is it was all made possible by years of smart planning and spending. His house will be close to being paid off when he starts drawing a very nice retirement check and he’ll still be sitting on a large investment in the stock market. This is how you do it!

For my next example I will not use names. I know a couple about my age that both have lower incomes. They were presented with a unique living situation for a few years that was saving them hundreds if not thousands a month on overhead but they had to provide a small service for the person that owned the house that took very little of their time. They vocalized intent to payoff debt and stash away a large amount of money during this period and get on the right track. Instead their house started to be filled with video games and new electronics. They started eating out everyday and going to the bar much more often. Every time a new iPhone came out they made sure to get it. They had their satellite provider add on just about every channel offered including the NFL Sunday Ticket. A nice motorcycle and new truck even showed up in their driveway. My friend’s golf bag suddenly started having top-dollar clubs appear in it one by one. They were living large for a while. All of a sudden they found out that their living situation was going to have to change very quickly. They had to find a new place to live and start paying all of the monthly expenses they were lucky enough to have avoided for a couple of years. The problem was that they didn’t pay off any debt, save any money, or even buy any of their own furniture. They quickly scrambled to find a cheap rent house of their own and move what little they had to that house. Luckily they had family willing to give away some furniture for their new house. Now they are barely getting by and are no better off financially then they were before even though they had 2 years with hardly any overhead at all. Those 2 years were instead used to by “toys” and have a great social life.

I don’t think people spend what they need to spend anymore but instead buy what they want regardless of what kind of financial troubles it causes. If money is tight then maybe you shouldn’t have a new smartphone with a large monthly bill or a cable plan with every channel known to man. When people need a new vehicle they seem to always buy the most expensive thing they can possibly afford. When it is time to get a new house everyone shoots for the stars. To hell with making smart financial decisions and only getting what you need. Folks seem to be more concerned about how others will judge them according to what they have.

Now I will use myself as an example. I’m in a unique employment position where I am a temp employee for 3 years then I have to “change status” for 6 months before I can become a temp again. During that 6 month period I have to go through a 3rd party contracting firm and I lose a very substantial amount of pay. I get no benefits or paid vacation, but quite honestly I make a larger income then 99% of the people I know so I gladly deal with the bullshit. I live in a house that is valued at what 1 year of my combined household income equals. I drive a 5 year old Hyundai Santa Fe and my wife and I share the car. We don’t pay for satellite or cable but instead have the fastest internet package offered in my area and stream our TV from services like Neflix and Hulu+ to Roku boxes we have in every room. Now I will say I have a nice TV and surround sound system, an outstanding guitar rig, loads of high end electronics, and overall a pretty nice setup. A few months back my wife took a different job that paid over $4 an hour less. The trade off was that she is much happier there and the benefits are a lot better. Plus, she’ll get back to what she was making in about 2 years. Two months ago I started my 6 months of being a 3rd party contractor and I lost about $1600 a month. Combine that with the roughly $640 a month my wife just lost and we are now making over $2200 a month less than what we were used to. Guess what? We can still afford our house. We made so much more than the minimum payment on our already affordable car that we went a couple months without even having to make a payment. We had a large amount of money saved that we are now having to tap into for things like car repair and medical bills, but our quality of life is no different than before with the exception that we cannot spend frivolously right now. We didn’t put up Christmas lights this year in an effort to keep our electric bill down and we aren’t spending the usual thousands of dollars on Christmas gifts that we normally spend each year. With a couple of small adjustments we are able to get by just fine because we never got wrapped in what buying things we could barely afford. Sure, I could have bought the mini mansion that was for sale not too long ago in my dad’s neighborhood. We could have bought a nice new Lexus or BMW SUV back when we bought our Hyundai. We didn’t because we were only concerned with getting what we need instead of being concerned with having the biggest and best things we could afford. We don’t care about “status” or “class”. We live humbly compared to a lot of folks even though we have the income to live much better than we do, but the trade off is that we can handle drastic changes in income or sudden, large expenses without having to sell off everything we own just to pay our monthly bills.

Bottom line folks….spend more wisely. Your parents didn’t gain their wealth overnight. Everyone would like to have a nice house and a luxury car, but you need to take the long road in acquiring those things so you have financial security. Quit worrying about what people will think about you and make your purchases according to what you can afford and what you actually need. I’m not telling you to completely stop buying nice things for yourself, but slow down and use better judgement in doing so. Job security is at an all time low along with annual raises, but the increase in cost of living expenses hasn’t slowed much if any. If you quit living over-extended now you can setup a very nice future for yourself and then the Jones’ will be trying to keep up with you!

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~ by jgdigitaljedi on December 6, 2012.