It’s a phrase I’ve been reading a lot lately around the personal finance blogosphere: lifestyle inflation. To me, it’s another way of saying that someone is working on keeping up with the Joneses. It’s also a concept that completely goes against so many of the basic tenets of personal finance. After all, striving and competing to keep up with one’s neighbors flies in the face of budget management, living within your means, and being happy with what you have.
And, I fear, I may be guilty of keeping up with the Joneses. I’m going to lay out the case for and against this self-inflicted accusation, and let you be the judge.
Keeping Up With The Joneses: Real Estate
It’s no secret that my house is currently on the market. I could give you a laundry list of reasons why we decided to list:
- We don’t like the school district into which our neighborhood feeds
- Since I work from home, I need a dedicated office
- We need more/better storage options to keep the kids’ toys out of sight
- Our dog needs a bigger yard
But if I am completely honest with myself – and with you – none of those is the real reason why our house is for sale. So what is?
This is going to sound bad… really bad…
We’ve “outclassed” a lot of our neighbors.
Wow, it looks even worse in writing than it did in my head. But the simple fact of the matter is, we live in a lower-middle class neighborhood that is a tad too close to some really rough areas of town for my taste. Most of my neighbors are hourly workers without a college degree; by comparison, my husband and I both have our undergraduate degrees from top-tier universities, and I have my master’s as well. My husband is contemplating a return to school, where he hopes to use his background in law enforcement as a springboard into a career as a prosecutor. Over the years, he’s actually had to arrest three of our neighbors on various charges ranging from drug possession to murder.
Maybe we’re guilty of keeping up with the Joneses when it comes to real estate… or maybe we’re merely trying to get away from the Smiths.
Keeping Up With The Joneses: Automobiles
This is an area where I can say, without a doubt, that we’re not guilty of trying to keep up with the competition. While lifestyle inflation may have hit our house proper, it hasn’t hit our garage… at least, not yet. My husband and I both drive new-ish vehicles; both our cars are 2008s. However, that’s where our lifestyle competition begins and ends. We both drive Hyundais: he a Sonata and me a Santa Fe. Neither vehicle has bells and whistles like leather seats or a moon roof, although I do use some of my birthday money every year to pay for my XM radio subscription (it’s one of my few guilty pleasures).
Need more proof we’re not competing with our neighbors when it comes to our vehicles? We plan to keep them until, literally, they die. My Santa Fe, which we use for most of our family trips because it’s bigger, already has 45,000 miles on it, but we hope it’ll last to 200,000 miles or more. My husband usually just drives his Sonata around town and to and from work; he’s optimistic it will last him until the new government standards for fuel efficiency go into affect in 2018.
Meanwhile, our neighbors – the same ones who can’t seem to afford to have their falling down siding replaced or their knee-high lawn mowed – are driving around in 2012 Escalades and Mercedes.
The verdict? Not guilty, your honor!
Keeping Up With The Joneses: Liquid Assets
A scathing January article published on the Huffington Post found nearly 43 percent of American households – that encompasses roughly 127.5 million people – are cash poor. Sure, they may be driving BMWs and live in McMansions, but they don’t have the liquid assets necessary to get them through a tough patch. I guess in this case, keeping up with the Joneses means driving yourself into debt.
My husband and I, on the other hand, are leading the contraflow out of the red. We have worked hard to contribute to our emergency fund, saving enough money to cover between nine to twelve months of expenses. We also fully funded my husband’s Roth IRA last year, marking the first time we funded any retirement account to the legal limit. We may be interested in keeping up with the Joneses when it comes to a newer, bigger house, but not at the expense of our liquid assets.
Keeping Up With The Joneses: The Intangible
Lifestyle inflation is about more than just the things you can see: material goods like a big house, a fast car, and a pile of money. It’s also about the things you can’t see – like the sending your child to a pricy private school or owning 50-yard-line season tickets to your hometown football team.
I have two examples of this type of lifestyle inflation. The first is my family’s gym membership. A few years ago, we were going to a bare bones gym, where my husband and I paid just $49 a month to work out; the membership included childcare. When I was pregnant with our second child, I decided I needed access to a pool; I craved the feeling of weightlessness in the midst of my pregnancy. We looked around for a new health club, and ultimately settled on the local Y. Now, we pay nearly double what we originally did at the no-frills gym and, with the exception of the addition of the pool, we’re getting basically the same thing.
Our family’s summer travel plans also suggest that we’re in competition with those proverbial Joneses. This year, we’re going on not one but two trips. The first is our requisite trip to the beach, a vacation we usually take with my parents, but this year – due to my dad’s health – we’re going with our best friends instead. The second trip is one I’ve been planning for years; we’re taking our almost 4-year-old daughter to Disney World. In both cases, we could have stayed at less expensive resorts, but instead opted for more luxurious accommodations. Why? Simply because we could afford to do it.
Am I Guilt of Keeping Up With The Joneses?
In some ways, I am guilty of succumbing to lifestyle inflation. We’re upgrading our house, plus we’re indulging in some of life’s luxurious that we’d previously nixed from our budget. On the other hand, we’re only making these moves – figuratively and literally – because we can afford it. We’ve been able to increase our household income, and are likewise able to increase what we’ve been able to do with the money – that means adding in more fun stuff, as well as increasing our savings and investments.
Reader, are you guilty of lifestyle inflation? In which ways?