Keeping Up with the Joneses
By Dave Ramsey, Financial Peace University
Peer pressure, cultural expectations, “reasonable standard of living” – I don’t care how you say it; we all need to be accepted by our crowd and our families. This need for approval and respect drives us to do some really insane things. One of the paradoxically dumb things we do is to destroy our finances by buying garbage we can’t afford to try to make ourselves appear wealthy to others. Dr. Tom Stanley wrote a wonderful book in the ‘90s that you should read entitled The Millionaire Next Door. His book is a study of America’s millionaires. Remember, if you want to be thin and muscular, you should study the habits of people who are thin and muscular. If you want to be rich, you should study the habits and value systems of the rich. In his study of millionaires, Stanley discovered that the habits and value systems were not what most people think. When we think of millionaires, we think of big houses, new cars, and really nice clothes. Stanley found that most millionaires don’t have those things. He found the typical millionaire lives in a middle-class home, drives a two-year-old or older paid-for car, and buys blue jeans at Wal-Mart. In short, Stanley found that the typical millionaire found infinitely more motivations from the goal of financial security than from what friends and family think. The need for approval and respect from others based on what they own was virtually nonexistent.
If we look at Stanley’s findings and hold those up against Ken and Barbie’s life plan, we find Ken and Barbie to be lost, off course, and clueless. Ken and Barbie are in our office all the time for financial counseling. Last year they were here, and their names were Bob and Sara. Bob and Sara make $93,000 per year and have for the last seven years. What do they have to show for it? A $400,000 home that they still owe $390,000 on, including a home equity loan used to furnish it. They have two $30,000 fleeced cars and $52,000 in credit-card debt, but they have traveled well and dressed in high fashion. The $25,000 left on a student loan from college ten years ago is still outstanding because they have no money. On the positive side, they have $2,000 in savings and $18,000 in their 401k. These people have a negative net worth, but they really look good. Bob’s mom is very impressed, and Sara’s brother frequently stops by to ask for money because they are “obviously doing well.” They present the perfect picture of the American dream that has turned into a nightmare. Behind the perfect hair and the French manicure, there was a deep desperation, a sense of futility, an unraveling marriage, and disgust with themselves. Bob and Sara are broke and desperate, and no one knows it. Not only does no one know it, but everyone thinks the opposite is true.
Resistance of the heart is real. First, of course, we like our nice houses and nice cars, and selling them would be painful. Second, we don’t want to admit to everyone we have impressed that we are fakes. Yes, when you buy a big pile of stuff with no money and lots of debt, you are a financial fake. Peer pressure is very, very powerful. “We are scaling down” is a painful statement to make to friends or family. “We will have to pass on that trip or dinner because it is not in our budget” is virtually impossible for some people to say. Being real takes tremendous courage. We like approval, and we like respect, and to say otherwise is another form of denial. To wish for the admiration of others is normal. The problem is that this admiration can become a drug. Many of you are addicted to this drug and the destruction to your wealth and financial well-being caused by your addiction is huge.
My weak spot is cars. After starting with nothing and becoming a millionaire the first time by age twenty-six, I had my heart set on a Jaguar. I “needed” a Jaguar. What I needed was for people to be impressed with my success. What I needed was family raising an eyebrow of approval based on my ability to win. I was so shallow to believe that the car I drove gave me those things. As I was going broke, losing everything, I kept the Jaguar by refinancing it repeatedly at different, friendlier banks. I even went so far as to get a good friend to cosign a loan so I could keep this image car. That is sick. I didn’t want to sell it and only came to my senses and sold the Jaguar on a Thursday morning because the bank assured me they would take it on Friday.
I was so disgusted with myself when I woke up and realized the depth of my stupidity that I swore off my drug, cars. I went to abstinence, meaning I didn’t care what we drove or what it looked like as long as we were winning in our money makeover. Fast-forward fifteen years. We had become wealthy again, and I decided to get a different car. A friend in the car business called me with a deal—on a Jaguar. So all those years and tears later, when it was no longer the driving force of my approval rating, God allowed a Jaguar back into my life. He returned what the locusts had eaten, but He only did so when it was not my idol. Rumor has it that God doesn’t like us to have other gods in our lives.
Dave Ramsey is America’s trusted voice on money and business. More than 1.5 million families have attended Financial Peace University in more than 30,000 churches nationwide. He’s authored four New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover and EntreLeadership. The Dave Ramsey Show is heard by more than 5 million listeners each week on more than 500 radio stations. Follow Ramsey on Twitter and on the web at daveramsey.com.
Publication date: October 24, 2012
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