Beware of trying to keep up with the Joneses
It’s human nature to compare ourselves with other people, at least to some extent. In the age of social media, we have more opportunity than ever before to do that. It can be a real trap on many levels.
Many studies are emerging on the negative effects social media can have on your mental health.But less attention has been paid to the negative impact it can also have on your financial health as well in our consumption-driven culture.
Here are four financial reasons why you shouldn’t try and keep up with the Joneses, whether you’re comparing yourself online or in real life.
1. Perception isn't necessarily reality
Material possessions can disguise a mountain of debt. Sure, your neighbour, friend or a family member might buy a flash new car or have a bigger house, but they also might be in a lot more debt than you are.
Interest rates in Australia are currently at record lows, but at the same time, personal debt levels are at a record high. That’s a dangerous cocktail when interest rates eventually rise again.
Mortgage stress levels are already on the rise, even in the current low-interest rate environment.According to the Australian Bureau of Statistics, you’re in mortgage stress if you’re spending more than 30% of your household income on home loan repayments.And if you add a higher interest personal loan and/or credit card debt onto a high mortgage, you can get into financial trouble even quicker.
2. You have your own unique circumstances
Trying to match the spending of other people without considering your own unique circumstances is also a potential recipe for disaster. For example, compared to the person (or people) that you’re trying to keep up with in terms of buying material possessions, you might:
be younger (and have had less time to accumulate the same level of wealth or possessions), and/or
have more dependants and associated expenses that need to be a higher priority for you right now.
3. It can be a never-ending spiral
Comparing what you have to other people can result in you never feeling truly satisfied. Someone you know will always be buying something or planning a holiday. Life isn’t a race. You can do things in your own time (and when you can afford it).
4. Money can’t buy happiness
It might be a cliché, but it’s true.
Spending to try and maintain or uphold an image won’t necessarily make you happy. It can even end up being soul-destroying if you’re trying to live by other people’s standards rather than your own.
The bottom line
It’s important to set your own goals, including financial ones, and then put a plan in place to achieve them. The best way to get ahead financially is to live within your means. In other words, don’t spend more than you earn. You can do this by developing a realistic budget and sticking to it.
You should also make sure that you invest in income-producing or capital growth assets (like property or shares) while reducing the level of non-tax-deductible debt that you have.
Source: Clientcomm library
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