(And Why You DON’T Want to Keep Up With Them)
Who Are The Joneses?
The Joneses might be your neighbors, a cousin or your work buddy. They could live next door or be Facebook friends. Whoever they are, we all know them. They’re the people who seem to have it easy. Every year they have a new car. They remodel their kitchen without batting an eye. Their kids are in fancy private schools. And they jet off to Aspen or Paris without a moment’s hesitation.
Somehow The Joneses can afford a lifestyle that’s just out of reach for the rest of us. How do they do it? They don’t have a better job or trust fund. They work like the rest of us – but they still manage to stay two steps ahead.
Their Secret to “Wealth”
As much as we try not to compare ourselves to our peers, it’s tough.
But what if you knew that everything the Joneses do is paid for with borrowed money?
Would you run out and get all the credit cards you can and drive up your debt so you can roll around in a shiny new sports car? Or would you think differently about The Jones’ fabulous life? Suddenly, it doesn’t seem so great.
The Joneses are not alone. Many Americans subsidize their lifestyle with borrowed money.
America Is Hooked On Credit
A recent report by the Federal Reserve shows that consumer credit is on the rise.
► During the fourth quarter of 2016, it rose at a seasonally adjusted annual rate of 6 percent.
► Revolving credit and non-revolving credit both increased, too – at an annual rate of 6 ¾ percent and 5 ¾ percent, respectively.
► Finally, consumer credit inched up at an annual rate of 4.5 percent as of December.1
Americans owe a staggering $995.5 billion dollars in outstanding, revolving credit as of December 2016. That’s $149.8 billion dollars more than they owed in 2012.2
This upward trend of paying on borrowed money is worrisome when it’s contrasted with how much people have saved for retirement.
In 2013, the median retirement savings of families aged 38-43 was just a little over $4000. A report by the Economic Policy Institute reveals a dismal future for retirement in the U.S.
“Nearly half of families have no retirement account savings at all. That makes median (50th percentile) values low for all age groups, ranging from $480 for families in their mid-30s to $17,000 for families approaching retirement in 2013.” –Economic Policy Institute, “Retirement in America”
Living on Borrowed Money Can Feel Like a Constant Stomach Ache
For many people, living off credit is an addiction. Credit abusers often feel shame because they hide their debt from their spouses and struggle to keep up with all of the mounting bills.
Others might be in denial – believing that it’s okay to live off credit cards. Perhaps their friends and family also rely on credit cards to pay for everything, so this behavior seems normal.
But it’s definitely not normal. Living off credit can lead to feelings of anxiety and guilt – not to mention a depleted bank account, relationship problems and bad habits that can last a lifetime.
If you think you might be someone teetering on the edge of abuse, check out this list of “8 Signs That You Abuse Credit Cards.” If you relate to any of these, it’s possible you need to change your behavior.
8 Signs That You Abuse Credit Cards:
- You don’t know your balance. You just pay the minimum monthly payment each month.
- This is your only source of discretionary income.
- You regularly apply for new cards.
- You pay your credit card bills using high-interest loans or cash advances from other credit cards.
- You don’t save money; instead you believe that credit cards are the solution to all financial problems.
- You avoid thinking about how much you owe, because if you did you would feel guilty.
- Your credit cards are all maxed out.
- You hide your credit card debt from your spouse and family.
If this is you, then the first step is to get out of denial. Admit you have a problem and then face it head on. You will feel so much better once you take control.
Going From a Spender to a Saver Right Now
First, figure out how much you owe on each card. Then make a plan to pay them all off – as soon as you destroy these cards.
Yes, destroy them.
You don’t want to be tempted by just one little brunch date or manicure. From this moment on, you’re a saver! So, you have to act like it.
It’s going to take time to refrain from buying new shoes the moment you want them, but if you keep exercising your self-control – it will grow into a strong muscle that can power through even the best deals and most amazing shoes you’ve ever seen.
We’re not advocating to live like a monk. But, you can’t enjoy life if you’re worried about how much you owe – and how little you have in the bank.
If you’re an impulse spender, then you might want to figure out what’s triggering you. Do you shop when you’re bored? Online? With friends? Whatever it is, you have to make sure you have an escape plan when the shopping urge strikes.
The Bottom Line
Escaping the credit card trap is tricky, but not impossible. People do it every single day, and so can you.
Remember, the moment you feel bad about your last-season sneakers as Mrs. Jones strolls into your workout class with really cute, new Nikes… imagine your bank account growing. Now, imagine yourself at 56, about to retire, with a wonderful nest egg that will allow you to have the lifestyle you’re used to. Pretty nice, right? Now imagine Mrs. Jones’ nest, there’s no egg in it – just a lot of credit card bills and old sneakers. Don’t be like Mrs. Jones.
It’s not too late to change your habits. Check out the light version of our Money Diary. It’s an amazing and simple tool to help you track your spending and income, so you can take control of your finances today! Ready to begin? It’s so easy – you’ll wonder why you didn’t start sooner!