Keeping Up with the Joneses

When your neighbor’s house goes on the market, do you jump on Zillow to check the price? Do you feel the need to replace your old vehicle when everyone you know seems to be upgrading? As a society, we seem to compare ourselves to those around us and wonder what we might be doing wrong to not be able to afford the same material items or trips.

Vawn Himmelsbach, writing for YahooFinance, says that you're not alone in feeling this way. Lots of people wonder how friends, family, and coworkers seem to be affording lavish lifestyles.1

One explanation is that they're financing it. According to the Federal Reserve Bank of New York, household debt in the US has reached a mind-boggling $17.69 trillion. And last year, for the first time ever, credit card debt topped $1 trillion, and that’s with interest rates of 25% and more now common. It’s no wonder half of Americans (48.6%) consider themselves "broke." And about two-thirds (66.2%) describe themselves as "living paycheck to paycheck."

However, those acquaintances who dropped $2,000 on Taylor Swift tickets may not have gone into debt for them. Himmelsbach points out that more than half of working Americans report having an additional income source or “side hustle.” The younger they are, the more likely that is to be true, with 68% of millennials and 71% of Gen Z reportedly having one. But it's common among older cohorts as well, with 32% of baby boomers saying they have an extra job.

Finally, you have to consider that the people you're comparing yourself to aren't getting extra money somewhere. Instead, they're sacrificing in some other area of their life to afford the purchases you see. Unfortunately for many, the area where they're cutting back is in saving for retirement. In exchange for major purchases today, they're sacrificing their financial security tomorrow.

With social media making it so easy for everyone to project the false image of an affluent lifestyle, it's no wonder so many have the illusion that everyone else is better off. It's good to remember that if you knew the actual financial situation of the friends and family who seem to have it all, you probably wouldn't feel nearly as envious.

As an educated and confident investor, be happy your friends are doing well. Focusing on what you can control rather than meaningless comparisons help keep your focus on the more important goals of financial wellbeing today and a fully funded retirement in the future.


1. http://go.pardot.com/e/91522/rica-seems-more-105500103-html/95rynj/2500447746/h/rb3c52IVaX3LC4RIauHwJVnCL9kaWdbP9IV9Dz1f6e4