30 - 2007

Give yourself credit: Real vs. perceived financial status

We’ve all heard the phrase “Keeping up with Joneses.” You might even be familiar with the reinvention of this phrase in “The Millionaire Next Door” or Dave Ramsey’s financial advice, both of which suggest we not keep up with the Joneses, since people flashing their financial status may be deep in debt — and we’ll be in the same fix if we try to compete.

Do you feel like you have enough money? Are you satisfied with what you earn? Can you pay the bills? Can you live within your means?

What’s the pressure?

Advertising and peer pressure in our society constantly tell us to improve our lives through purchasing. We are “supposed” to spend money at the gym (wearing stylish workout attire and new shoes, of course), at the salon, have manicures and pedicures, change our wardrobes every season at least, dine out with friends (pay a babysitter for this “me time”), live in a beautiful home decorated with new furnishings and window treatments, have our children look stylish, obtain all the latest technology from iPod to TiVo, and drive a couple of new vehicles.

Ideally, we also have massages and attend therapy weekly, as well as tithing to our religious denomination of choice, donating to charity, supporting our children’s school with donations, auction purchases and fundraisers, sustaining a healthy college fund for our children (of which we have 2.3), giving lavish gifts, entertaining splendidly and dedicating 10 to 20 percent of our income to retirement savings.

Don’t forget auto, disability and umbrella insurance, a well-funded health savings account and an emergency fund containing six months’ income just in case.

Holy smokes. I feel exhausted (and dead broke) just writing about it.

What’s your perception?

Which of the items above do you do? Which do you feel, vaguely, you “ought to” do?

The fact is, to live that lifestyle, you either need a huge income, an inheritance — or a lot of debt.

There’s a subtle pressure to make everyone think you are wealthy, because in America today, wealth conveys success. And the flip side is that poverty conveys failure. I buy so many items at thrift stores, consignment shops or through Craigslist — or get them free. But I still have a lingering feeling of “don’t tell anyone you do that — that’s how poor people live.”

Of course, I’m fortunate not to be “poor.” But because of our educations and professions, Mr. Cheap and I often feel that we ought to be on par financially with some wealthier parents at our daughter’s school … or with the mythical Joneses.

Where do you stand?

In reality, compared to Census data for our area, our income is about average. This gives me some breathing room when I wonder why we aren’t saving more, why things seem tight sometimes, why exotic vacations never seem to be in the cards. Are we succeeding? Sure, we’re OK. Are we wealthy? No.

You can get a real picture of how people live and save through USA Today’s “Millionaires in the Making” feature.

It also helps to evaluate your position in life. If you have just been out of college for a year or two, your net worth is probably low. If you’re a double-income, no kids household, chances are you can enjoy life a bit while also planning for the future. If you’re in your 50s and your children are long gone, your net worth should be looking sunny. If it’s not, you need to make changes NOW.

In our case, we have a two-year-old mortgage, a three-year-old car with a loan (and an old beater with no debt), a six-year-old child, and one parent in graduate school. We are building our empire now. When Mr. Cheap finishes school, we’ll start down the slope of building our income — and our savings.

Match up your perception with your reality. Chances are, your financial status will be stronger, and you’ll be more content, too.

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