Q: I live in an area that has a fair bit of conspicuous consumption. People are doing major rehabs to their houses and driving luxury cars. They go on expensive vacations. Their kids have all the latest expensive toys.
Part of me wants to keep up with the Jones and be part of the “in crowd” but we can’t really afford it, to be honest. The other part of me is really concerned that my kids are being warped by exposure to these people. Any good advice?
A: A big part of making smart personal finance decisions is being well-grounded and understanding that life isn’t a competition. Life is something to enjoy.
Enjoying life doesn’t require having an expensive car or all the latest gizmos. If you are judging your life by what you own, it’s unlikely that you are happy in the purest sense of the word.
You can live a rich life simply by having enough money to purchase what you need. If you don’t need it, what’s the point in buying it?
The trap that many fall into is a desire to impress others with possessions. This can lead to taking on more debt than makes sense. For all you know, your neighbors may have already fallen into this trap. No need to join them there!
Instead of wasting money on luxury items that you don’t really need, my recommendation is that you do something practical with the money. For example, prepaying your credit card debt, auto loans and mortgage all help you save big bucks over the long run. Alternatively, put the money into a savings or investment vehicle and start building up your retirement nest egg.
Some times it’s hard to differentiate between things you need and things you want. Before you run to the store and bring an item to the checkout counter, ask yourself whether you could live without the item. If you still want it, determine if you can wait a while. Putting off the purchase as long as possible gives you time to think about whether you really want the item or are just buying on impulse.
You should also consider whether you can save money by getting the item used. If you feel you absolutely must have a luxury car for example, you can save a ton of money by buying a used one instead of a new vehicle.
As for your kids, yes, some neighborhoods can certainly warp kids’ financial values. The best remedy is to talk to your kids about your values and make it clear why you are doing what you do. Then, as in all parenting, hope for the best and pray that your lessons persevere over those they might pick up by simply interacting with others in your neighborhood.
By the way, if you moved away from your neighborhood because you don’t like their community values, you’d be one of many who have done so.
Two wrongs don’t make a right. In life, sometimes you make mistakes and end up in the wrong place. Staying there just adds insult to injury.