Your Neighbors’ Finances: Looks Are Deceiving
I read an article on CNN/Money that I just had to post a link to and comment on, even at the risk of beating a subject to death. The article is about three families in suburbia, each assuming the others are in better shape financially than they are. It’s a perfect example of the all too common way people view conspicuous consumption.
Here are a few choice quotes along with my comments.
[The finances of those around you] also, like it or not, help shape how much you spend and save and color your perceptions of your own financial well-being.
This truism, to me, is as plain as the nose on your face. Yet people don’t see it for what it is - no less than a major determining factor in your financial future. Who your social group is has a strong effect on your saving and spending behavior.
Still, Marni’s plan to solve her family’s financial problems is not to cut spending and pay down the debt. “I don’t think watching our expenses will be enough,” says Marni. “The only way we really could be better off is if we make more money.”
That quote is just stunning to me. This is a classic trap nearly everyone falls into. ‘If only I made more money, everything would be all right.’ There are two sides to the equation - income and expenses. Trimming expenses won’t affect income, but you’d better believe increasing income will increase spending 90% of the time.
Emily, who says she has a problem saying no to her kids, admits some of it is spent on impulse purchases for the boys, who regularly return from trips to Target with a new toy. “When we’re at the mall and they ask me to buy something, what do I say? ‘We can’t afford it’?” asks Emily. “We can.”
How about saying, “No,” to the kids? I do it all the time (though I use “Let’s put it on your list”). For many people, the question ‘Can we afford it?’ is almost incidental. Can you afford a $30 toy? Sure. Is it likely a waste of money that will soon be gathering dust along with the others? I guarantee it.
And next year they’ll spend $13,000 to send Jillian to kindergarten at a private school in the more exclusive part of town - even though the town’s highly rated public schools are a major draw for Wallingford.
Ugh. $13,000 for kindergarten? That’s private college tuition. This is not what people mean by ‘education debt is good debt.’
[Speaking about one of the other two profiled families] “We’d love to travel like the Mendells,” says Miriam. “I don’t know how they afford it.”
They can’t afford it!
Sadly, the kind of disclosure of others’ finances this article provides is missing from everyday life. I think if it weren’t - if you could see how other people are really doing - we’d all spend a little less and be a lot more content.
October 18th, 2007 at 8:23 pm
For K-12, that’s at least $169,000 of tuition, assuming it doesn’t go up. Not good debt at all. More than Mr. Micah’s PhD debt! And he’s getting a PhD, not a highschool diploma. Better earning potential with the latter.
My mom didn’t have much trouble saying no to us, fortunately for my family’s finances. And I didn’t hate it too much, which means I’ll probably be able to do it with my own kids.