There are many people who don’t care about keeping up with the Joneses because they know, as Dave Ramsey is fond of saying, that “The Joneses are broke!” However, there are others who like to have all the niceties that the Joneses have. These people may think the only way to keep up with the neighbors is by going into debt.
Here’s a secret–you can have all of the nice “stuff” the Joneses have if you’re willing to do just two things.
What are the two things?
Buy used and avoid buying until you have cash.
It sounds simple, right?
The beauty of it is that this plan is very simple. It just requires some sacrifice in the beginning.
Start with your first car. Sure, you’d like to get a brand new one and finance it, but this is a bad idea. Instead, pay cash. Yes, you may get a $3,000 beater. The key is to put money in the bank or a high-yield online savings account every month like you would a car payment. If you financed a nice car, maybe you would have to pay $400 a month in a car payment. Instead, put that money in a savings account; all of it goes to you, and none of it goes to interest. In 3 years, you have $14,400 which is enough to buy a nice sedan that is a few years old or less. Now, your car is starting to look like the Joneses’.
Keep making that same car payment to yourself, and in 5 years, you have $24,000 which will buy you a much nicer car. Of course, if you were prudent, you’d keep saving until the sedan you bought earlier got a bit older.
Look at your clothes. Rather than buying piece after piece of clothing, practice buying mix and match pieces. If you’re a woman, perhaps buy 3 skirts, 3 dress pants and 2 dresses along with 5 or 6 tops. You’ve only bought 13 or 14 pieces of clothing, but you have enough to make many different outfits. You’ve stretched your clothing budget just by strategically buying pieces. Save even more by buying the clothing from a consignment store or thrift store. (You’d be surprised how many clothes at a thrift store are in very good condition and will only cost you a few bucks a piece.)
What about a house? Again, the key is to sacrifice early. Rent a cheap apartment for say, $500. Even better, share the apartment with a roommate and only pay $250 a month.
If all your friends are paying $900 a month (or more), see if you can put aside the difference in a bank account. Within a few years, you may have the 20% down payment required. (Of course, this largely depends on the area of the country that you live in.)
When you buy that first house, consider buying one that is a duplex or a two flat. If you’re lucky, your tenant will pay most of your house payment, and you can keep saving the difference for a nicer private residence.
Often the difference between a financially savvy person and the Joneses is the willingness to buy used, to save for purchases, and to plan ahead.
How are you able to keep up with the Joneses without going into debt?