Keeping up with the Joneses could be keeping you in debt – and chances are, they are in the red too. By Lisa Templeton
Hands up if you chose the bigger TV, the fancier smartphone or the island holiday just to match or to outdo your neighbours or friends? The keeping-up-with-the-Joneses syndrome drives us towards that cardinal mistake: spending more than we earn.
And it’s all so we can feel good about ourselves. Well, feel good that is, except for the stress and fear of debt, and the fighting over money. That’s why we need to take note of this bad habit, and stop.
Behind the white picket fence
Here’s what you need to remind yourself of: the Joneses, cruising to their enormous home in their big, shiny SUV, are no doubt seriously in the red. They don’t own anything. The bank holds a big bond on the house, and the car is financed and really belongs to the bank too.
So, though the Joneses may look good, every cent they earn is spent even before it drips into their bank account each month. And that lifestyle isn’t much fun when you are stressing about how to fund it.
Getting sucked in
‘We are indoctrinated from the youngest age to be competitive, to climb up the social ladder,’ says Dr Helgo Schomer, psychologist on 567 Cape Talk and Talk Radio 702. Essentially, we are driven to show off our success and to own what others possess. Not only that, but we live in a society where clever advertising spurs us on and where we’d rather have something now, than have to work hard and wait.
‘We are social creatures and we still identify with our tribe. We may no longer be hunter-gatherers, but we will still use the people next door as a yardstick,’ explains Dr Schomer. ‘And so we seek out those with a similar income, attitude and belief system – and with that comes the trappings of success. We want to show our income and status to our neighbours. And if they move upwards, we want to too. It’s all about keeping up with our tribe.’
The truth is this, though: the people against whom you measure yourself are more than likely broke. That is if you consider that more or less five million South Africans are drowning in debt, according to the FinScope South Africa 2013 financial survey (Moneyweb.co.za). This means that almost 14% of us older than 16 are burdened by heavy debt. Not only that, but, according to the National Credit Regulator, almost half of SA’s consumers using credit are behind by three months or more on at least one account.
Why so much debt?
According to traditional wisdom, before we spend, we should ask: ‘Do I really need it?’ But we often don’t ask ourselves that, because we want to need it! And we want to need it because others have it.
According to a survey by the Pew Research Center, some Americans now consider the following to be necessities (and we are not that far behind them): home computer (51%), cellphone (49%), satellite TV (33%) – even a flatscreen TV and an iPod were essential to some.
Breaking the cycle
‘The first step is to become aware of the problem,’ says Dr Schomer. ‘Ask yourself: “Do I really need to do this?”’ Basically, we need to make conscious choices, he says.
‘You can land up on a treadmill of making and spending money to fund holidays and phones and huge flatscreen TVs, without ever actually thinking about why you’re doing it.’ Commit to getting off the treadmill.
Forget the Joneses
There is a rule of thumb to running long-distance races: forget about everyone else around you and pace yourself to run at a comfortable speed that’ll leave you with energy at the end. It’s easy to take off with the pack and then exhaust yourself before you have reached halfway. Finance too is better at your own pace. Forget the pack and follow these simple guidelines instead:
Live within your means It may seem like an old-fashioned notion and, of course, some debt is inevitable or we’d never get ahead by buying property, for example. But ensure you can afford what you do buy. You aren’t buying it for anyone but yourself.
Think very carefully before you buy Do you really need a big SUV to go to work in? Do you actually watch every channel in your satellite suite or could you crop it down? Do you need the priciest phone or could you get by with something simpler?
Cut your costs Downscale or get rid of anything you don’t need that could be costing you money.
Don’t forget to save The FinScope survey found 58% of South Africans don’t save. It’s time to start. Chat to a certified financial advisor and put money into savings monthly.
Keep a budget It is crucial to know whether you are spending more than you earn. After a few months, a budget will show you where you are wasting money.
And always remind yourself: chances are, everything is not as financially rosy with those Joneses as it may appear. Meanwhile, you are finally living within your means and actually starting to save for the future. Ka-ching, ka-ching!