status symbols Archives - SavingAdvice.com Blog

It’s far easier to fall into the “keeping up with the Joneses” trap than most people believe. You look at your friends and all of the cool stuff that they have. You like what you see, so you begin to buy all that cool stuff as well. Before you realize it, you’re surrounded by the latest and greatest model of everything and working 3 jobs to pay for it all. The easiest way to stop the madness is to recognize the signs and break the cycle before it gets too far. Let’s look at a few of the possible signs that you might be trying to keep up with the Joneses, and the steps that you can take to avoid falling into this trap.

You drive a Cadillac, but can’t make the rent payment

One of the most common status symbols is a car. Don’t go overboard just to look good in your wheels. New car payments can easily break the budget. Better to drive a Saturn than to have to live in your new BMW. Find an affordable car that meets your needs rather than one that keeps your bank account empty.

You have to have the newest smart phone as soon as it hits the stores

New cell phones, tablet PCs and other personal electronic devices are as much about fashion as function in today’s society. Consumers will stand in line for hours when a new model is released, even if there are very few new features. If you’re one of those people, train yourself to wait a few weeks or even months to buy the new version. Chances are it’s going to have bugs that need to be fixed, anyway.

You’re a VIP at the rent-to-own stores

With the high price tag on new electronics, home furnishing and such, it’s almost impossible to purchase them without financing. If you’ve over-extended your credit, the rent-to-own alternative is a seemingly easy solution. These rental centers fill an important niche, and even though interest rates are extremely high, it’s even possible to improve your credit score through your purchases if you’re careful. However, if you have accounts with more than one store at a time and you’re receiving phone calls to let you know about new merchandise, you’re probably in way over your head.

Your total credit card bill is as high as your mortgage payment

Most middle-class households have at least one major credit card. Credit cards have many advantages such as making buying easy, and in emergencies they can be invaluable. The down side is that credit card debt has a nasty way of piling up. Don’t get caught in the loop of paying only the monthly minimum on your credit card bill. If you can’t afford to pay off the balance at the end of the month, don’t make any more purchases on the card until you do.

You have TVs you don’t watch

That’s a bit of a generalization. It’s nice to have stuff, but stuff you don’t use is a waste, whether it’s televisions, furniture, electric corkscrews – anything, especially hi-tech, expensive gadgets. If you have things just to have them, it’s likely that you’re on your way to being in the trap.

You purchase what you see the stars wearing or using

If the items on the top of your to-buy list include the fashions you see on reality shows or kitchen gadgets you saw on your favorite daytime drama, you might want to consider why you’re buying them. If the answer is simply that you saw it on Days of Our Lives and had to have it, consider not buying them at all.

The savings account is empty, but the closet is overflowing

If you’re spending enough on clothes and nice things that you’re not building any savings, it’s time to take another look at the budget. Set yourself a minimum payment to your savings account every payday and stick to it. Have a rummage sale and bank the proceeds. Don’t let your spending whittle away the emergency or vacation fund.

You eat out every payday even if you have to let a bill slide

We all enjoy a night out and dinner and/or with the boys or the girls on payday is a great way to unwind when you collect your pay. If you’re juggling bills in order to have that night out, you’re starting a cycle that’s hard to break. Skip the night on the town and cover the rent, or you may find yourself eating at the soup kitchen.

You put more emphasis on name brand than fit or quality

Ladies, if you’re carrying a Gucci bag, but can’t fit everything you need in it, maybe you should have considered the one you saw at Target. You know, the one that was just right, but now you can’t remember the name? Guys, Calvin Klein isn’t going to care if you buy store-brand slacks; in fact he isn’t going to know.

You don’t know your debt to income ratio or credit score, but you know where to find the best price on Prada

This is a question of priorities. If you worry more about the state of fashion than your own financial state, it’s time for an intervention.

Don’t let your social status become more important than your wellbeing. Living beyond your means is a downward spiral to a very, very bad place.

(Photo courtesy of kennethkonica)

Sometimes I hear advice along the following lines: “If you want to be wealthy, you need to wear and drive the status symbols of wealth. That’s the only way anyone will take you seriously.” In other words, fake it till you make it. I can sort of understand where this advice comes from. It is hard to land an executive job if you’re wearing jeans and a t-shirt. It’s hard to get a bank manager to give you a loan for some real estate if you show up driving a Pinto and wearing overalls. You do stand a better chance of being taken seriously if you look more like the expected picture of an executive or real estate maven. But there is a very real danger in faking this level of success.

I know a woman who took this advice to heart. She had a dream of owning her own business so from the very beginning she bought a Mercedes, Prada shoes, Coach bag, and Chanel everything else. She bought all of this on credit while making an entry level salary as a marketing associate at a software firm. Her income wasn’t nearly high enough to cover these purchases, but she rationalized that she needed to look successful in order to be successful. Of course, her spending forced her to live in a tiny one bedroom apartment on the iffy side of town (great place to park the Mercedes, by the way). She said she didn’t mind because no one could see the apartment so it didn’t matter. What mattered was what people could see.

She was determined to fake it until she made it. Did she ever make it? Nope. And her failure wasn’t because of a lack of talent, either. She simply spent so much money on her outward appearance that she had no money left to spend on the business she wanted to start. She finally got a big contract for some work — the big break she’d been faking it for — but she couldn’t pull it off. She couldn’t buy supplies or hire employees. She couldn’t rent space and she couldn’t put together any marketing efforts. No bank would give her a loan because her credit was tapped out on all the trappings of success. She lost the contract and her reputation took a big hit, as well. Last I heard she was still working as a marketing associate and trying to figure out a way to pay down the massive debt she’d incurred. Barring a windfall, I doubt her business will ever get off the ground because she’ll simply never have the money to start it, which is a real shame because this woman was talented and could have made a real mark on the world.

Contrast that story with this one: I know another woman who wanted to start her own business. From the beginning she plowed all her extra money into that business rather than herself. She started small and worked at growing the business. When she had to call on clients or on a banker, she dressed professionally in clothes bought at outlet stores and on sale. They weren’t name brand clothes, but they were tasteful and classy. She drove a respectable but not luxurious Honda and she was well groomed. She might not have looked like she had a million dollars, but she did look professional, serious, and capable. She let her portfolio of work do her talking at a client site and she let her balance sheet and credit report do the talking in a banker’s office. She was well respected, even without flashy displays of success. She was taken very seriously and soon had more work than she could handle and financing to cover a huge expansion. By all measures she has now “made it” and has allowed herself a few luxuries like a BMW and a Prada bag.

The first woman tried to start a business after she was already so far behind financially that the business was simply unsupportable given her income and debt level. She tried to cultivate a look rather than a serious business. The second woman put the business first and herself second. She knew that she would need to look presentable, but she also knew that her work and credentials would speak far louder than any car or outfit ever could. Because she put her money into the business and the work instead of trying to fake it, she is now successful whereas the first woman is not.

This is the danger of trying to fake it till you make it. You may put so much effort and money into the faking it part that you are never able to get to the making it part. If you can’t afford the displays of success, you’re starting out behind. When all the money goes to the image and not to the substance of your success, you’re not going to have any money left over when it comes time to produce the work. You’ll end up in debt before you even get started and, even if you eventually become successful, you’ll still spend years paying off all those years you faked it. So don’t try to fake it. Try to look respectable and attractive on the budget you have and let your work and credit report do the talking for you. You’ll be much closer to making it that way.

10 Clues You Are Trying to Keep up with the Joneses