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Saturday, March 25, 2017

Keeping up with the Joneses

Posted by Robert on October 4, 2010

Not too long ago, I went to visit a friend at his home. As I drove up, I realized that he lives in the “estates” portion of his community. I stepped inside his home and I was immediately aware that his house was nicer and more expensive than mine. After my visit, on the way home, I noticed that he drives a top of the line BMW. My well-worn minivan is never really attractive, and it suffered from the comparison. Since he has a young family and is about my age, I wondered how he is able to have such nice things. That must be what it means to try and “keep up with the Joneses.” Wanting to keep up with the nice things that others own is a normal sentiment, but it’s misguided. Here are some reasons that it will never work.

The first, and most apparent problem with any comparison, is that I can’t know how much my friend paid for his house or his car. With the way the real estate market has gone in Calgary, there is a chance that he paid the same for his home, this year, as I paid for mine last year. He did tell me that he got a “smoking deal” on it, and that prices in his neighbourhood have already moved higher. I can only feel happy for him. And nothing is to say that he has more equity in his home than I have in mine. Even if his home is worth more, let’s suppose his is worth $600,000 and mine is worth $400,000, it is entirely possible that, after our mortgage amounts ($500,000 and $300,000),  each of us have $100,000 of equity. It is even possible that he doesn’t own the BMW, Many people lease cars, which gives them low monthly payments and no real ownership.

However, my friend is successful at his work. I think there’s a good chance that he is responsible with his money, and that his circumstances are simply different from mine. Not everyone starts their financial life at the same starting line. I graduated from university with no debt, and went to work for a couple years before having children, saving quite a bit of money. I have another friend whose parents gave him a 25% down payment for his home to help him get started in life. I know someone else who is going to dental school and will probably graduate with $300,000 of student debt. None of us started from the same financial starting line, so it’s not fair to compare our present financial situation.

Another common unfair comparison I see, especially with my siblings, is because of age. First, my sister surprised me one time by responding, to something I said about money, that “we can’t all be rich like you.” Yes, we own a larger house and drive a slightly bigger car. But we also started our financial journey seven years earlier. It makes sense that we would be more advanced in our journey. Soon after that, my parents moved into an estate home, a huge bungalow that is richly finished. But it’s not fair to compare my home to theirs, since they are 25 years ahead of me. I especially see this unfair comparison with my younger brother. Being the last one at home, after my parents were already financially established, he got used to a very nice standard of living. When he moved out, he seemed to try to continue enjoying the same lifestyle. In 30 years, he will have earned it.

I think that our horse represents all of these mistakes. After 10 years of marriage, my wife and I finally feel we’re able to have a horse. Between you and me, it’s a half-lease, so we pay less than we would for regular boarding and care, not to mention the up-front cost. Friends who hear about our horse probably don’t realize that we can’t afford to own it outright. And they probably don’t understand that we’ve waited this long before taking on this monthly cost. And they would make another mistake if they looked around and said: One of my friends has a big house on the lake, one has a classy BMW and one has a horse. Why don’t I have a lake home, a BMW and a horse? Since each family has chosen just one of these luxuries, it’s unrealistic for one family (in our middle class circle of friends) to expect to own all of these luxuries.

Why do we make these comparisons? Our possessions seem to represent our success and our happiness in life. Because our society prizes competition, we want to know how our success compares to those around us. Not only do possessions poorly represent our success, happiness is not a competition. When we realize that we have no way of comparing our financial success to that of others, we can stop trying to keep up with the Joneses. I can be happy with the few luxuries I allow myself, and allow my friends to be happy with their luxuries. Better yet, we can enjoy them together.

In what areas do you compare your possessions to others? What luxuries do you own, that people around you could be jealous of?


9 Responses to “Keeping up with the Joneses”
  1. deegee says:

    People who LBYM are not likely to accumulate any possessions others will be jealous of. But those of us who LBYM (saving instead of buying stuff) and who were able to retire early may have others who are jealous of us being able to retire early and get out of the rat race.

    From reading the comments on this blog, I see that many of us don’t have cars, TVs, cell phones, and other household appliances.

    We want the lifestyle, not the stuff.

  2. hi Robert,
    this is a very interesting article. The quote that comes to mind is from the original movie Wall Street, where Martin Sheen and Charlie Sheen are in the elevator and Martin Sheen says a line something to the effect of how a man is not measured by the size of his wallet and yells it at Charlie Sheen. As a professional certified financial planner, I deal with this scenario on a daily basis. Client is looking to buy things and do things and have things that are well beyond their grasp, but want these things because of the Joneses.
    What I also see are clients struggling with mounds of debt and not really knowing how to manage it.
    Years ago when I was working at the bank. I had a client who would come in and his suit looked like it was about 35 years old and his hat looked like it was about seventy years old. He himself was about 70 years old and was the richest client that the bank had likely had in excess of $300 million but you would never know it from looking at him. At the same time, I had a lawyer come in looking to get a $5000 Visa card wearing a $10,000 suit having a $25,000 Rolex watch, and probably had an $15000 diamond wedding ring that he wore. This lawyer had an income of over $40,000 a month more than most people make in a year. Yet, due to his spending habits and his credit, he was unable to qualify for that $5000 visa.
    the point I’m trying to make here is that some people may look rich but it’s all done using debt and they will eventually burn out. We are seeing this over and over again in the US with people who bought homes well above their means or leverage their homes as a bank account to buy all the big fancy toys.

    When will people start realizing that all this “Stuff” won’t make them happier and start using their money to do the things that will make them happier?

    Just my 1frankthought (Twitter)
    Frank Wiginton

  3. Maybe this is weird, but I don’t compare possessions at all. Do people really do that? When I do see someone’s house or car that’s super nice, I just tend to think they must have worked very hard for it – and I’m happy for them for buying something that makes them happy.

    Like deegee, I have found that people do make comments on the times I’ve taken time off work since I reached FI – so my friends call me lazy. :-) Yes, yes I AM lazy.

  4. Robert says:

    Wow, those are some thoughtful comments. Thanks!

    deegee, you’re right that some people prefer lifestyle over stuff. And sometimes, people are jealous of that. Even if I don’t have all the fanciest stuff, I find it helpful to be grateful for my lifestyle.

    Frank, those are some fabulous examples. You’re right that you can’t tell someone’s net worth by looking at their stuff, and I sometimes catch myself forgetting that. You also raise the question about happiness. Behavioural economists have shown that people generally overestimate how much happiness a new purchase will bring. But I think the deeper issue is that many people don’t know what will make them happy, so they just keep buying stuff.

    Jacq, although I’m not sure, I think you’re in the minority. I think many people, especially insecure people, compare themselves to others. We learn it as children, at school and in sports. Even at work, in many places, we’re compared to others. It’s impressive that you’re able to be happy for the success of others.

  5. Yeah Robert, but those people probably made a choice that I wasn’t willing to make – that might be “get married” ;-), I don’t know. Just like I made a lot of choices that most people wouldn’t make to get to FI (working 2 jobs, old furniture…)

    People who value saving and freedom / independence (like most who would read this) can’t understand the desire for status that other people have. It doesn’t mean it’s wrong or our way is better or anything – we’re just wired differently and you can try to change it to some extent but it will always be a stretch. And we’ll always think our way is *the right* way to do things. And in turn, they won’t even get the concept of wanting independence or feeling a little thrill when your savings account goes up.

  6. Hi Robert: First I would like to say that I like this blog. Second I think most people want to have it all, not unaturally so and quite understandable. But, unless you have buckets of money, choices must be made. To get married or get married and have children. Yes, that is a choice and if you do have kids a very expensive one. Have a goal and really picture yourself living that goal. Not working is a great way to live and you do live longer, no pressure and you move through life with a stately grace. First, the goal of bringing together the money bundle then letting it work for you. After you have your bundle you invest for safety as preservation of capital is the prime concern.

  7. I have to add to this with a saying from Dale Carnegie. One of the primary drivers why people do what they do is for the feeling of importance. How you derive your feeling of importance determines your character!
    I probably don’t have the quote exactly right but I think most people understand the point.

  8. Jon Snow says:

    Sometimes my wife and I find ourselves a bit envious of friends and colleagues who quite clearly put more of their income into “stuff” than we do. Our ultimate goals are completely different from pretty much everyone we know. I wonder what the reactions are going to be when we announce to our employers, friends, and family that we are done with working… in our early 40’s. Puts a grin on my face….

  9. Robert says:

    David, it really does come down to our choices, as you say. And people won’t really make any progress until they take responsibility for their choices. I disagree that children are expensive, but that’s the subject of another blog post.

    Jon, I think you have a great idea for how to stay focused. It’s easy to become distracted when others seem to have lots of nice things (or vacations), but thinking of the look on their face when I can retire in my 40s somehow makes it all worth it.

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