How Keeping Up With The Joneses Can Be A Debt Trap

Keeping up with the Joneses mentality can get you into debt.

We’ve all heard the phrase “keeping up with the Joneses”. But who are these Joneses and why are we trying so hard to keep up with them? According to financial psychologists, keeping up with the Joneses is very real concept – and it’s financially dangerous, rooted in psychology more so than financial illiteracy. The cause harks back to the animal kingdom; we’re not the only species that desires to be seen as wealthy and desirable – think birds with brightly coloured feathers trying to attract a potential mate and, well, you get the picture.

This Thanksgiving, a time to reflect on life’s positive aspects, consider whether you’re truly thankful for what you’ve got – or if you’re digging yourself into debt through this social comparison.

Perception Gaps Lead To Debt Holes

A Country Financial Security survey found that spending exceeded earning more often than one might think and that the “perception gap” instills a false sense of financial security. Among those surveyed, over 50 per cent said that they spend more than they make at least a couple of months out of the year. This meant that they had to rely on other means to pay those outstanding debts. Nine per cent said that they are living a lifestyle that they cannot afford, while 21 per cent said their monthly spending exceeds their earnings at least 50 per cent of the time.

So how do these people pay their bills? The survey found that 36 per cent dip into their savings, and 22 per cent rely on their credit cards.

Why Is This A New Problem?

After reading the survey results, I wondered how it is that debt is more of a theme today than ever before. The truth is, our access to debt is greater than ever before. In the past, while most people received payment of some kind in exchange for work, many didn’t have access to additional funds. As a result, they were forced to budget and to spend only what they had. Today, credit cards, home equity loans and questionable lending arrangements allow us access to money we can’t afford to borrow. We live in a world where debt is completely normal – in fact, it’s necessary. Most of us have never had to live hand-to-mouth. These days, we can keep up with the Joneses.

The Joneses Are Just Like Us

Learning there were no “real” Joneses was eye-opening for me. In fact, most of the people I thought were the wealthiest turned out to be debt poor. It is quite possible that the very person you’re trying to keep up with is, in fact, not wealthy at all – think about that. And while the debt they take on makes them appear rich on the surface, it’s actually pulling them further and further away from actually attaining that lifestyle. Those bills and debts eventually need to be paid, and when they can’t, bankruptcy is the only thing that will save them.

How The Rich Get That Way

Truly rich people have assets, not piles of debt. Getting rich involves saving (here’s a great way to get started!) and investing whenever and wherever possible. It means knowing what you can afford to spend each month and sticking to it. It means amending your budget as your income rises or falls. It means ignoring the Joneses, and focusing on you. Can you afford that coveted item? Will it set you back financially, or help to move you forward? It means looking at every single purchase and asking yourself, “Do I really need this?”.

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Lifestyle / Lifestyle News / Personal Finance / Your Budget

One thought on “How Keeping Up With The Joneses Can Be A Debt Trap

  1. I also believe that we have more debt today simply because things come way too easily for us. My grandparents immigrated here during World War II, when they escaped their homeland. When they arrived they had to start their own farm and were dirt poor. They actually appreciated the little that they had, as you have challenged us to do on this holiday. When they started making more money from their farm, they were still extremely careful because they never wanted to end up back where they started again. Could it be that because – again, like you said – few of us have ever seen really really hard times (and by that, I mean near homelessness) that we’re so eager to get ourselves in too deep? Could it be because we’re stuck with this idea of things “never happening to us,” or a lack of understanding of just what it means when everything is taken from us? I’ve seen hard financial times, but certainly nothing like that and I don’t know anyone that has. I’m so thankful, not particularly for what my grandparents went through, but that they survived and could tell me about it so that I too, could have that strong work ethic and resistance to debt that they did.

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