Honestly, who would impress you more as someone who has his or her act together:
- A person driving a new upscale brand name car, or one driving an older average car?
- A family living in a tony neighborhood, or one living in a solidly middle class one?
- Someone who travels the world each year for a cool international vacation, or someone who stays domestic for a budget-oriented trip?
A person driving a sporty or luxury car, living in nice home in an upscale neighborhood, who travels to far-flung corners of the globe each year seems like an interesting person! Wouldn’t it be more fun to hang out with someone like that, rather than the person driving an old car, living in some ordinary middle class home in a plain neighborhood, who doesn’t travel to exotic places regularly?
“Yes” would probably be the answer for many if not most people, I would guess. No scientific data here, but I think that the average person out there would be more impressed by the first option in each of the 3 questions above.
Of course, in money circles the answers might be different, but us personal finance junkies are probably outliers that way 🙂
To be fair, many people can rightfully afford those nice things. However, my guess is that there are far too many people who simply can’t afford to live such lives, but feel like that’s the standard they want to live up to. They just couldn’t imagine having a life with “average” cars, homes, and vacations (among other things). They feel like they’re deserving of something better than average.
Moreover, many people just don’t want to appear average or give off an impression that they’re not successful. It’s Big Hat, No Cattle Syndrome at work. This can really kick in when your peer group around you has nicer things.
Again, I probably see things differently than the typical non-personal finance enthusiast, but it just doesn’t matter to me if I have things that aren’t as nice as others who I know. Our cars, our home, and vacations are all pretty average-looking in my opinion. Is it bad that they aren’t different?
I wasn’t always this way. Literally, when younger, I wouldn’t wear anything to work unless it was from Nordstrom. I took some great vacations, having visited all but 3 states in the US while also visiting Europe multiple times, China, India, and a few other locales. Real estate dreams became an obsession of mine!
I even remember a guy I worked with, older and higher up the organizational chart than me, driving an older most car. How lame, I thought! What a boring dude!
Yeah, that was an immature view. He was actually smart, though I didn’t realize it then.
These days, it’s more about my kids and financial freedom. Or, more accurately, the quest for financial freedom. This is because I realize that time is precious, and is more important than spending hard-earned money to look successful, cool, or whatever.
It’s not that I don’t care at all about nicer things. That would be disingenuous to say. Rather, it’s just that they’re not as important now, and I can suppress the still-present interest in such things because other things mean more.
Thinking in terms of time and money, let’s consider a few alternatives for each of those 3 options above.
Car: A nice upscale car costing $40,000, or an ordinary used car costing $10,000. Difference = $30,000.
Home: A beautiful new “McMansion” costing $500,000, or a nice but older-looking home costing $300,000. Difference = $200,000.
Vacation: 3 years of deluxe international trips costing $25,000, or 3 years of modest domestic trips costing $5,000. Difference = $20,000.
So, someone wanting to look good and be cool might be tempted to spend an extra $250,000 for that more “impressive” lifestyle. Just how much time does someone have to work to spend an extra $250,000?
Let’s assume that a person has a solid salary of $100,000 pre-tax. After taxes, how about saying this person has $70,000 in income? If the person has annual expenses of $50,000, that means that $20,000 is saved annually.
If that same person wants to upgrade to a better life, it would take 12.5 years worth of savings in order to finance the good-looking options. There are probably a number of other ways one could do such calculations, but a quick calculation like this makes the point: it can be very expensive to live up to a certain image.
So why do it?
It’s fascinating how so many people would probably disagree with my view, and think I’m being cheap. Perhaps, but it’s actually more intended to put great value on time and peace of mind, instead of letting image and status control me.
Admittedly, it’s not the material things that I get jealous of; rather, it can be others achieving more success with the same level of effort that can get me envious at times in certain situations. That’s another post another post for another day.
But material things? No, they don’t matter too much in terms of competitiveness. Too time-intensive! Financial security and future freedom mean more, at least to me. That’s the intoxicating goal, rather than possession of nice things.
What Do You Think?
Do you ever get caught up in spending to impress? It’s okay to admit it if you do 🙂
Do you consider the time it takes in order to afford certain things?
Do you know anyone who has certain lifestyle standards that he or she just won’t compromise?