Keeping up with the Joneses is an age-old disease that inflicts neighbourhoods across the world.
This is where you try, at any cost, to keep up with neighbours, by matching or even outdoing what they buy, where they go on holiday or whatever hobbies they have. You think that if you don’t, they will look at you as socially and economically inferior.
This is ridiculous. Follow this path and it can get you into real financial trouble.
by ‘Pop’ Momand
Cars
Your neighbour gets a new Mercedes. A brand spanking shiny new Mercedes with all the latest gadgets, leather seats, tinted windows, 4-wheel drive, the works. You look out the window admiring it and think ‘I want that. I want something even better. I’ll show those Joneses.’
Except, you can’t afford that £50,000 Mercedes. The reality is the price of the car is almost your annual salary and you’re still paying off your current car which you can barely afford!
You bump into your neighbour later that day and he proudly shows off his new Merc. He invites you to take a tour showing off the glossy interior and all the latest gadgets it has. He even invites you for a test drive! You politely decline as you are ‘busy’.
Seething, you resolve to get a better car than this.
However, what your neighbour doesn’t tell you is that the car isn’t his. He works in Sales and it’s part of the package with the company he works for. He needs the car to get around and visit clients.
You start looking at car financing deals. For a £50k car over 5 years at a 7% interest rate, you will need to pay £985 per month. (Compare the market car finance calculator)
Your throat tightens. That’s almost the same as your monthly mortgage payment.
But then, you reason, you could trade in your current car as a deposit. But you still haven’t paid that off. Your mind starts whirring with all the permutations as to how you can make this happen.
Then you realise. It’s ridiculous and will needlessly put you under severe financial strain. It may even bankrupt you!
The value of a new car drops immediately after you put the keys into the ignition and drive it off the forecourt. Going into bankruptcy to keep up with the Joneses for a car that decreases in value every year?
You look out at your Toyota and think ‘It’s a good car, only a few years old. Why bother changing it?’
House Extensions and Renovations
You look out and see the neighbour across the road has builders in. And you wonder what work they are getting done on their house?
You bump into your neighbour later that week in the supermarket and get chatting. You ask her what she and her husband are getting done in the house.
She tells you they are getting a 500 sq. foot extension at the back of the house and a brand-new kitchen. She also tells you that the estate agent said this will add another £70k to the value of the house.
You ask how much all this is costing? She smiles sweetly back and says she ‘simply couldn’t tell’ and then walks off.
You go home and start looking around at your own house thinking you could do with a new kitchen and maybe an extra bathroom too. Then, you start pricing how much this would cost.
You check your ISA and yes, you have enough to pay for all of this if you cash in your index funds. But it means cashing out 90% of your ISA funds that you have been saving for years.
You even call estate agents asking them how much these renovations would add to the value of your home.
You have all the figures ready for when your husband comes home from work. As soon as he’s in the door, you tell him how you bumped into your neighbour across the road, about all the work they are getting done on their house and how much it will go up in value.
Then you present the figures for the work you think you should get done on your home.
Your husband looks surprised, looks around your home and tells you that it is perfectly fine and you don’t need any work done. The kitchen has all modern appliances and you don’t need another bathroom because you already have two!
‘But what about adding value to our home?’ you cry. ‘You have a point’ he says. ‘But, we’re not selling, and we don’t plan on selling or even renting this place any time soon. So really, why bother?’
You look back over at your neighbours as the builders work on updating their house. You look around at your perfectly nice home which is more than adequate for your needs and you think ‘Why bother?’.
Holidays
You go to work and a colleague, who is also your neighbour, returns from holiday.
‘Where did you go on holiday?’ you ask.
‘Oh, just a little skiing trip in Val-d’Isère. We do like to go every year’ he says smugly.
Val-d’Isère, you’d never even heard of it. You quickly Google it and see that it’s a fancy ski resort in the French Alps near the Italian border.
‘That must have been expensive’ you say.
‘Yes, but we simply can’t do without our annual skiing trip’ he says smiling.
‘I love skiing too’ you say.
‘Oh really, and where have you been skiing?’ he asks.
You panic. You’ve only ever been skiing at that indoor skiing place in Milton Keynes your friends brought you to last year. And, you kept falling over, nearly breaking your ankle.
‘Aspen’ you say.
‘Aspen, Colorado?’ he asks.
‘Yes,’ you say. You’d seen some famous actors pictured there in the newspaper a few weeks back and it’s the only ski resort you can think of.
‘Do tell’ he says coming over to your desk.
‘Oh, another time’ you say, ‘really busy’ pointing at all the paperwork on your desk.
Later that evening you call some friends saying you all ‘must’ go skiing. You frantically start looking at websites seeing what the best deals are and you see how expensive it is.
You have been saving into a Lifetime ISA (LISA) to buy your first home for several years. This trip would take a chunk of those savings and set you back a year.
You call one of your friends again to discuss the skiing trip.
Your friend says ‘But you’re saving up for a deposit to buy a house. This trip will cost a fortune. Wouldn’t you be better off putting that money into your LISA? We can always go back to that indoor ski place in Milton Keynes if you really want to ski rather than spending all that money going to some fancy ski resort. I mean, why bother?’
You think to yourself ‘Yes, why bother?’
Hobbies
You bump into a neighbour in the communal car park of your apartment block. He takes out a fancy set of golf clubs.
‘I didn’t know you played golf’ I say.
‘Yes, I’ve just joined St. Georges golf club’ he says.
‘Oh, that really fancy one that has a restaurant, swimming pool and tennis courts as well?’ I ask.
‘Yes, that’s the one’, he says.
‘I’ve heard it costs a fortune to join’ I say.
‘Yes, but as well as playing golf, it gives me a chance to network as well. Lots of high rollers are members you know’, he winks knowingly.
I go into my apartment and immediately start checking out St. Georges Golf Club. Membership is £4,000 a year. What?! That’s a fortune but being a member would give me status and a chance to network with high-net-worth people also.
I’m still trying to pay off student debt for the Master’s degree I did 3 years ago. But I could afford this membership. I could just get another loan to pay for it. With all the networking I could do once a member I’m sure I could get a better-paid job or potentially a lucrative business opportunity.
Then I start looking at my finances. The only way I could afford this golf club is via a loan and this would continue and compound every year putting me under severe financial pressure. I might get a better job or business opportunity if I join but what if I pay out all this money and I don’t?
Then you tell yourself, ‘I don’t care if my neighbour is a member. I have better things to do with my time and money. There are so many networking opportunities around the country that are free so why bother joining this golf club?’
Keeping Up With the Joneses Can Ruin You Financially
You worry that people will deem you inferior if you don’t get that fancy car, that expensive house renovation, go skiing in fancy ski resorts or have expensive hobbies.
Everyone is thinking about themselves, not you.
Keeping up with the Joneses could ruin you financially. So, think carefully before buying that new car, updating your home, going on that holiday etc.
If you can afford it that’s fine. Do it because you want to and can afford to do it rather than trying to impress people you may barely know and maybe not even like!
Thanks for reading!
Have you any stories about keeping up with the Joneses? Please share in the Comments section.
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