Facebook & Keeping Up With The Joneses…

facebook-making-you-spend-more-money

Seems like the entire world is on Facebook. Want to find out what that old college roommate you are no longer in touch with is up to now? You can find him on Facebook. Want to stay in touch with your extended family spread across the globe? No better platform than Facebook. Want to promote your products or services or to just stay connected with your customers? Facebook it is again. And it’s all free. Well almost but even the best of things that are supposedly free come at a cost and that cost is oftentimes borne by our personal finances.

That fact is corroborated in a study by the American Institute of CPAs that concluded that too much Facebook can end up making you spend money you don’t have. But we all sub-consciously know that. You see on your Facebook feed that this other someone is living large with a fancy vacation or just bought this new set of wheels or that new gadget…whatever it is but now you suddenly want it too. That’s classic “Keeping up with the Joneses”. You come home from work and on that next driveway, you find a shiny new automobile and you wonder what… how do they have this? What about me? I am driving this old clunker. I got me to have one too.

Facebook is the modern electronic version of “Keeping up with the Joneses”. I teach for a few hours each week on topics pertaining to business, investing and personal finance to high-school and sometimes college students and I always pose this question in one of these sessions that clearly highlights the flawed perception of what being wealthy means to us. And it’s not their fault. This is how we all think. So I put up these two pictures – one of them is a family with a big fancy house, a new luxury car and other trappings of wealth. I then show this other family with a modest home, used car and older gadgets. I then poll these kids as to which family is what they would consider as rich. And without exception, a solid majority sides with the family that appears rich.

But that is far from the truth. And the data is so clear that people who end up financially secure are overwhelmingly the folks who spend a modest amount on housing, drive older cars and are not into flaunting much wealth. He is now deceased but this fact is corroborated with striking evidence in Thomas J. Stanley’s  “The Millionaire Next Door” which he co-authored with William D. Danko. Folks who seemingly appear to live modest yet happy lives and who don’t appear rich are in fact swimming in cash and the ones who we think are rich are the ones a paycheck away from disaster.

And the key decider for most people living a financially secure and comfortable life is staying put in the same house through their working lifetime. Sure you can save a few bucks here and there by skipping that favorite latte or brown bagging that lunch but housing is such a big component of a typical family’s monthly expense that without controlling for that, the other budgetary measures don’t come close to making a dent in your family finances. We Americans often think that this housing thingy is a step ladder that I am in this house now and then I am going to this bigger house next and then to this McMansion after that but this process turns out to be a very expensive ordeal and a key impediment to you living a financially comfortable and secure life.

And now that we have this Facebook that does so many great things – connecting people and all the rest – but at the same time, creating this “Wantitis” but that is up to you and me to fight against.

So live a good life but don’t let this Facebook envy outsmart your personal finances.