Investing 101

Keeping Up With the Joneses Is Costing You

Most parents have asked their kids this question at some point: “If so-and-so jumped off a bridge, would you follow?”

This is a facetious way of saying you don’t have to do everything your friends do. And somebody needs to be saying it to us in adulthood too.

More than half of Americans pay more attention to how their friends spend than to how their friends save.

In other words, you’re more likely to say, “Wow, look at Bob’s Maserati!” than “Wow, look at Bob’s 401(k)!”

Social media has only worsened this jealousy – also called fear of missing out, or FOMO. In this day and age, users are posting only the best versions of themselves, carefully curating what other people can see.

Put simply, it’s plain old peer pressure. And it’s likely costing you.

More than one-third of Americans (including nearly half of millennials) are spending more money than they can afford to in order to keep up with their friends.

 

I’ve personally seen this play out to a fault in gift-giving. There’s a mentality that if Jack and Jill spent $100 on your wedding/birthday/holiday/baby gift, then you have to spend at least $100 on theirs.

But reciprocity isn’t black and white unless you live identical lives.

Ultimately, this is a toxic cycle. You’re trying to keep up with your friends, who are trying to keep up with their friends, who are trying to keep up with billionaires and celebrities. Everyone loses.

So if you’ve ever fallen victim to this monetary FOMO, it’s time to break the tit-for-tat spending habits. No one is keeping score but you.

This is more important than ever right now…

In a 2021 survey, about 35% of respondents said their emergency savings had gone down since the pandemic began. And the percentage of people who had any emergency funds at all was found to be at a 10-year low.

Additionally, 63% of Americans said their personal finances were affected by the pandemic. And 16% said they had more debt than they had at the beginning of 2020.

The world may not have returned to normal yet. But when it does, resist the urge to make up for lost time or splurge on a celebratory vacation you can’t afford.

At the end of the day, your financial order of operations should always be this: SAVE what you need… INVEST what you can… GIVE what you want.

If you spend wisely, the Joneses might be trying to keep up with you one day.

Good investing,

Rebecca

P.S. Simply keeping track of your spending isn’t the same as actively saving for retirement. Here’s how to get started.

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