Keeping Up With the Joneses
We are social beings, it is only natural to compare ourselves to others who we deem to be in similar socioeconomic circumstances. The term “keeping up with the Joneses” dates back over a hundred years to a 1913 comic strip in The New York Globe, where a family, the McGinises, struggle to financially progress at the same rate as their neighbors, the Jones family. There are a handful of comic strips in the Globe relating to this concept - it ran from 1913 to 1940. One strip that stands out in particular depicts the wife in the McGinis household pleading her husband to ask for a raise, due to the wife of the Jones household, who “goes to matinees, entertains, wears wonderful clothes, and gets something out of life”. Mrs. McGinis insists to her husband, “you have got to make more money!” In the next frame of the comic, Mr. McGinis is shown urging his boss to give him a raise, claiming that his rent has increased, clothes are more expensive, “food has gone up, shoes are up, everything is up”. [1]
In the hundred-plus years since the origin of the comic strip, the concept of the struggle to keep up with the Joneses has been exemplified in a number of different ways. Through the boom following World War II to the time leading up to the Dot Com Bubble, the Global Financial Crisis, and most recently with meme stocks and the general excess of today we have found ways to convince ourselves that if we are not keeping up with the latest trends in society that we are missing out.
The desire to keep up with the Joneses also surfaces in many ways. The immediate knock-on effects of winning the lottery are generally understood by many - once someone wins they are prone to hear from family and friends asking for a portion of their
winnings under the pretense that after all, winning the lottery is an immense stroke of luck. The ensuing stress of the individual who purchased the winning ticket is well documented, but a lesser-known fact is that the neighbors of lottery winners show highly concentrated bankruptcy data. According to research from the Federal Reserve Bank of Philadelphia, “the dollar magnitude of a lottery win of one neighbor increases subsequent borrowing and bankruptcies among other neighbors.” [2] Even with the cognizance that a neighbor was incredibly lucky to come across a winning lottery ticket, people are still inclined to increase spending on goods and services to meet the habits of their newly minted wealthy neighbors.
The reason all of this is important, and the reason that the very notion of keeping up with the Joneses has persisted for so long is due to the fact that it is so tempting to veer into the realm of lifestyle creep and overspending. Enough time passes and one is drawn to buying whatever luxury item that catches their eye, spending more on their vacation, or eating out more. Sometimes this is due to the habits of one’s peers, sometimes it is mentally chalked up as a reward for good saving habits. The reason the reward for sticking to one’s financial plan is typically an immense reward is because it is difficult to do. As Charlie Munger would say, the first rule of compounding is to never interrupt it unnecessarily.
The highly influential book The Millionaire Next Door succinctly ties these concepts together in asserting that “wealth is more often the result of a lifestyle of hard work, perseverance, planning, and, most of all, self-discipline” [3] . Of these concepts, the latter is usually the most troublesome and requires the most consistent and conscious effort. As the book continues, “an increase in cash flow generally translates into significant increases in consumption. Is it any wonder that only a small portion of Americans are financially independent?” [4]
Regardless of the current trend pulling you to keep up with the Joneses, it is crucial to work to define your own financial goals that are unique to your individual risk tolerance, time horizon, and income needs. Implementing a financial plan is one process, staying the course is another. As tempting as it may be, focusing on your own glide path is critical. Multiple generations have grappled with the concept of progressing in lockstep with their peers - we should learn from their mistakes as much as we can. There is no pride in financially overextending yourself to impress your neighbors and peers, only to suffer the consequences in the long term in the form of bankruptcy in the worst case scenario.
Disclosures and Sources:
Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk.
The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
The Financial Consultants at Vintage Wealth Advisors are registered representatives with, and securities offered through, LPL Financial, Member FINRA/SIPC. Investment advice and financial planning offered through Financial Advocates Investment Management, DBA Vintage Wealth Advisors, a registered investment advisor. Financial Advocates Investment Management, Vintage Wealth Advisors, and LPL Financial are separate entities.