The American Dream has evolved past the humble "white picket fence." Way past. We all strive for the "nice" home (as defined by HGTV and Pinterest) as opposed to the cozy one, keep a perpetual car payment instead of driving an older model, and chauffeur kids to an endless array of pricey activities rather than sending them outside. Call it creeping consumerism, entitlement, or plain old peer pressure. The point is, we see our hectic and expensive lifestyles as normalóand itís time we realized that keeping up with the proverbial Joneses is actually extravagant and irresponsible.
The Joneses youíre trying to keep up with arenít the doctors and lawyers two streets over. Theyíre the middle managers, teachers, and laundromat owners next door, andóguess what?ótheyíre as anxious and unhappy as you are. Thatís why I want to reframe our perspective on whatís "normal" and adopt a simpler lifestyle with less debt and stress.
Fulfilling lives are lives based on your core values, not the ones society dictates. Itís amazing how many of us feel we have to live in the right neighborhood or drive a new car just because our peers do.
Often, happiness means making a deliberate choice to stop keeping up with the Joneses. You have to pay attention and get mindful about where your money goes. Itís worth the effort. The consequences of living beyond our means outweigh the short-term satisfaction we feel when we pull out a credit card to make another upgrade. Lavish spending just does not make us happy at all (at least not for long). Sane, smart money management does.
I point to Denmark, which, according to data collected by the Gallup Organization, was ranked as the happiest country in the world in recent years. The results are summarized in the World Happiness Report 2013, and the U.S. came in at 17. While many factors contribute to Denmarkís ranking, Danesí attitude toward money is certainly one of them.
In Denmark, modesty is a virtue, and showing off is looked down upon. Overall, Danes donít feel the need to pursue bigger homes, nicer cars, and more fashionable clothesóand consequently, they carry less unnecessary debt. Danes also place a high priority on living a socially balanced life, setting aside time to spend with their families and friends.
Here, I highlight nine financial and psychological benefits of cutting ties with the Joneses:
“ Donít wait for that next raise or until your car is paid off. Ditch whatever excuses youíre using to stall. If you donít make sacrifices now, you will have to make them later.”
1. Youíll set a sane, sustainable example for your children. For many families, choosing to stop emulating the Joneses will mean making significant, tangible changes in everyday life: canceling your premium cable package, dining out less, or setting a limit for back-to-school clothes spending, for example. And thatís a good thing because it provides you the opportunity to sit down with your children and have an important financial conversation.
Walk your children through the changes youíre making and point out how much money youíll be saving. Then, explain your reasoning: "We are saving for your college education; we are saving for our retirement; we are living within our means." Be sure to point out that being in control of your finances positively impacts your peace of mind.
2. Youíll be able to set up an emergency fund. Emergency funds may not seem like a top priorityÖ until you absolutely, positively need one because you lost your job, or because the septic tank flooded, or because your car broke down.
Often, people end up putting unexpected expenses on their credit cards when they donít have an emergency fund to tap into. It can take years to climb out of the deep, dark hole the debt creates. Donít underestimate the peace of mind an emergency fund can bring, whether you end up using it or not. If you donít already have enough saved to cover expenses for six months, make this your top priority.
3. Youíll be in a position to fund your future. You know that you should be aggressively saving: for the traveling you want to do, to help fund your kidsí college educations, and especially for your own retirement. But when youíre figuring out how to allocate each monthís paycheck, other (often unnecessary) expenses always take precedence, despite your best intentions. This trend is more widespread than you might think: 36 percent of Americans, including over 25 percent aged 50 to 64, have yet to start saving for retirement, according to a national poll published in BankRate's monthly Financial Security Index.
Whatever your age, itís crucial to stop living on the financial edge and start increasing your savings percentage. Donít wait for that next raise or until your car is paid off. Ditch whatever excuses youíre using to stall. If you donít make sacrifices now, you will have to make them later. Itís a sad fact that a lot of the Joneses will be strapped for cash in their golden years, and by then, youíll want to be well ahead of them, not just keeping up.
“ You control where you go, what you do, and how much you spend.”
After building up your emergency fund, I recommend making your savings automatic, whether youíre funneling money toward an employer-provided 401(k), a Roth IRA, a taxable investment account, or something else. Even if youíre able to set aside only $25 or $50 per month initially, itís a step in the right direction. Youíll soon see improvement, and knowing youíre taking control of your money feels great. On my website, www.joyoffinancialsecurity.com, I offer resources and tools to help you calculate and increase the percentage of your income you are saving.
4. You can work less and live more. Hereís the great irony of keeping up with the Joneses: Youíre spending, spending, spending on a big house, a new car, and all the latest electronics because these things are the status quo, and you feel that you deserve them. Then you have to work even harder to sustain the lifestyle that youíre not really enjoying at all because youíre stressed and exhausted. Itís a vicious cycle that many people never break because they never realize that the source of their unhappiness is, in fact, all of the "stuff" they thought would bring them joy.
Iím not saying youíll be able to quit your job when you rein in your spending, but you might find you can slow your soul-crushing pace, or that you can cut back on the overtime. Even a few extra hours each week can be applied to living a healthier life (perhaps through exercise), to hobbies, and to nurturing relationships with friends and family. And best of all, those activities wonít be overshadowed by gnawing worries about money.
5. Youíll feel less anxious and more at peace. Self-deprivation and frugality may not sound like fun. But the truth is, controlling our money feels good. Conversely, spending without limits feels bad. The initial rush you may get from treating yourself to everything you donít need wears offóand it does not bring more fun, greater happiness, or better memories. In fact, perpetually low account balances and credit card debt often lead to long-lasting anxiety and unhappiness.
There are many things in life we canít control. Thatís why itís so important to pay attention to the things we can control and to be aware of their impact on our happiness. You control where you go, what you do, and how much you spend. Youíll find that when you control the controllable(s), youíll feel much more at peaceóbecause you arenít worrying about how youíre going to pay for everything!
6. You can simplify your life and zero in on what really matters. Ever notice how much time and energy a so-called "normal" life sucks up? You have to clean, maintain, decorate (and redecorate) that spacious home. Electronic devices and gadgets monopolize your attention (and your kidsí). Your schedule is packed, and youíre constantly zooming from work to the dry cleanerís to the latest stop on the traveling soccer teamís tournament calendar. Not only are you over stimulated, youíre exhausted! And most discouraging of all, half the activities on your calendar donít bring you any fulfillment.
“ Donít forget: Psychology research shows that improving our relationships with others is the number-one way to increase our happiness.”
Resolving not to keep up with the Joneses forces you to clarify what your values are. Instead of letting society dictate your priorities, youíre faced with the liberating responsibility of reordering your life. Often, that involves simplifyingógetting rid of unnecessary and unwanted items, obligations, and self-imposed responsibilities. This frees up literal and figurative space for you to make new and wonderful changes, which will probably involve spending more time with the people you love. Donít forget: Psychology research shows that improving our relationships with others is the number-one way to increase our happiness.
7. Youíll up your gratitude quotient. When youíre being swept through life by the current of consumerism, itís easy to fall into a "more, more, more" mindset: When can I go on vacation again? When can I go shopping? When will I be eligible for an upgrade on my phone? And when youíre not getting your "fix," you feel a sense of lack that distracts you from the present moment with its small joysólike reading a book to your child or working in your herb garden.
Where you place your attention determines your attitude, your behavior, and your choices. Focusing on what you donít have increases stress, dissatisfaction, and financial irresponsibility. But when you scale down your life, the many blessings you already have will become more apparent to you. And when youíre grateful, you donít need to fill some inner void by acquiring more stuff.
8. Your priorities can shift away from things to experiences. For most people (and certainly for the Joneses), having a good time comes with a price tag. From booking lavish vacations to eating at expensive restaurants to making sure our homes are decked out with flat-screen TVs and sound systems, we donít mind pulling out our wallets in the name of enjoyment. (And often, we donít worry about the price tag until itís too late.)
“ Do some soul searching and ask yourself what really brings you joy before you get out the credit cards.”
But what if the finest things in life canít be bought? Psychology shows that experiences are always more impactful on our happiness than things. Take vacation, for example. Though they may not realize it, most people would be happier pursuing quieter, more off-the-beaten-path, yet still deeply fulfilling experiencesóhiking, bike riding, or playing in the surf with their kidsóthan crowding into some overpriced tourist trap. Do some soul searching and ask yourself what really brings you joy before you get out the credit cards.
9. Youíll be in a position to give back. Living a life thatís meaningful to you instead of to the Joneses will probably increase your margins of time, energy, and money, making it possible for you to give back.
It all ties together. When youíre living a life based on your own values and are focused on relationships and experiences instead of stuff, youíll find that you want to leave a legacy thatís more substantial than a nice house and car. And giving back (either with our time or our money) has been shown to increase our happiness.
Despite our national tendency to overspend, I am encouraged that the pendulum seems to be swinging back toward financial responsibility. I point to a recent study showing that Millennials (also called Generation Y, born between 1980 and 2000) are funding Roth IRAs at a higher rate than older generations. If that weren't enough, a recent BankRate poll shows 63% of Millennials don't have a single credit card.
Apparently they were paying attention during the 2008 financial crisis. They saw how their parents, friends, and neighbors were severely impacted, and they are now more likely to save for the future.
No matter what generation you belong to, though, remember that a truly rich life is based on strong relationships with friends and family, giving back to our community, expressing ourselves creatively, leading healthy yet simple lifestyles, and spending our money in a way that is in alignment with our values.
Donna Skeels Cygan, CFP, MBA, is the owner of the financial advisory firm Sage Future Financial, LLC, and the author of†"The Joy of Financial Security: The art and science of becoming happier, managing your money wisely, and creating a secure financial future."†She has been recognized numerous times as one of the top financial advisors in the U.S.†She seeks to help her clients take control of their money in a way that maximizes their happiness. Cygan has contributed to articles and has been quoted in national newspapers and magazines, including the†Wall Street Journal,†New York Times,†Chicago Tribune, Forbes, Kiplingerís, and†Investment News. She has appeared on TV programs in New York, Seattle, Portland, Phoenix, Minneapolis, and Memphis, as well as on many radio shows across the U.S.†She also†enjoys speaking on many topics related to money and happiness.†To learn more, visit www.joyoffinancialsecurity.com or follow her on Google+.