The phrase “keeping up with the Joneses” is frequently used to describe the phenomenon of conspicuous consumption by those who are concerned about their relative social standing and prestige. This psychological phenomenon can cause people to excessively expand their lifestyles in order to appear wealthier or financially better off than they really are. In this Navigator, we explore the underpinnings of this tendency, as well as the potential adverse consequences that may result from it. We also discuss some strategies for combatting the all-too-common desire to “keep up with the Joneses.”
Keeping Up with the Joneses
The oft-uttered phrase “keeping up with the Joneses” entered the American lexicon in 1913 as the title of a comic strip in which the socially ambitious McGinis family struggles to match the glamorous lifestyle enjoyed by their neighbors, the Joneses. The author, Arthur Mormand, claimed that the comic strip was based on the experiences of his own family in trying to keep up with the “well-to-do” class in his wealthy Long Island community. The phrase caught on and became a part of common parlance in the United States, where the phenomenon seems to thrive in practically every neighborhood in every town across the land.
While most of us have anecdotal evidence that the desire to keep up with the Joneses exists, the academic community has also found confirmatory analytical proof of it. One 2018 study by the Philadelphia Federal Reserve found a material increase in household spending in neighborhoods where lottery winners live (excluding spending by the lottery winners themselves). Much of this increase in spending was fueled by higher levels of debt and riskier investment behavior on the part of non-winners. The study showed that this behavior ultimately led to a statistically significant increase in the rate of bankruptcy of non-winners relative to the level seen before the lucky winner’s windfall. Research such as this simply confirms what we all know to be true: people have a tendency to compare their lifestyles to those of their peers and then increase their consumption when they feel they might be falling behind.
The Psychology of Keeping Up with the Joneses
What causes people to feel such an intense need to “keep up with the Joneses?” Research suggests that it comes down to a few important quirks in the human psyche. At our core, humans remain a competitive species. Throughout much of our history, humans have had to compete for territory, resources, and mates, among other things, in order to survive and thrive. And though we no longer have to compete for these things in the same way that we once did, our competitive nature remains. We are inherently wired to feel the need to project strength, power, and status to those around us. But the desire to keep up with the Joneses offers far more complexity than is seen on the surface.
Social comparison theory, which was first introduced in 1954 by psychologist Leon Festinger, suggests that we have an innate tendency to compare ourselves to those that we consider our peers. Research suggests that the most important characteristics for determining our peers are gender and racial/ethnic background, though vocation, geography, and perceived social-economic status also play a role. We look at those that we deem to be similar to ourselves and then compare ourselves to this peer group. This comparison can be healthy, as it can help us to evaluate our own progress and standing within a group and inspire us to improve at a particular endeavor or to feel a sense of accomplishment for progress we’ve made. It may also simply help us feel a sense of belonging within a group.
However, such comparisons may also lead us to feelings of unhappiness when we see ourselves falling behind our peer group. Research has found strong ties between our perceived standing among our peers and subjective levels of happiness. In one famous study, test subjects were asked to choose between two scenarios: earn $100,000 per year with the knowledge that those around them made more, or earn $50,000 per year with the knowledge that those around them made less. The results? The majority of test subjects preferred lower pay, as long as those around them earned less. These results indicate that the feelings generated by social comparison can be so powerful that they cause us to act contrary to our own self-interests, and this is exactly what we see in the phenomenon of keeping up with the Joneses.
To complicate matters further, there are likely other psychological influences when it comes to keeping up with the Joneses. For example, we know through research using MRI technology that making a purchase can lead to a brief but powerful feeling of pleasure, much like that caused by drugs or alcohol. This short-lived sense of euphoria can reinforce or enhance a person’s unhealthy desire to consume as a result of social comparison. Other psychological factors, such as low self-esteem, can also come into play and further drives one’s desire to keep up with the Joneses.
Social Media Amplification
Social comparison and the need to keep up with the Joneses are obviously not unique to modern times. These tendencies have been a part of the human experience for hundreds, if not thousands, of years. However, modern technology has made it even more difficult to avoid falling prey to some of the more detrimental aspects of these phenomena.
Social media has made it incredibly easy to share detailed information about our personal lives. Indeed, users of social media know that it is nearly impossible to avoid what is happening in the lives of friends, family, coworkers, etc. And the ubiquity of social media has expanded our peer groups. In the days before social media, it was really only possible to compare ourselves to those in our immediate orbits. However, we now see images and videos of people across the world, creating far more opportunities to compare ourselves to others. And of course, few social media users post pictures or video of themselves doing their taxes or cleaning their toilets. Instead, much of the content on social media shows users on vacation, enjoying a fancy meal, or doing some other fun, glamourous, and/or unique activity. So not only do we find ourselves making comparisons to a far wider group of people, but we are comparing our lives to what are effectively other people’s highlight reels. These are skewed comparisons that can lead to an erroneous belief that others are much better off than we are.
What’s the Harm?
So why is trying to keep up with the Joneses potentially so harmful? As we noted previously, the desire to consume on par with one’s peers can lead to very poor financial decisions, such as taking on excessive amounts of (unproductive) debt, increasing investment risk, or simply hindering savings efforts by making unnecessary purchases. While there is nothing wrong with taking out a mortgage to purchase a home, taking on a much larger mortgage in order to purchase a larger or fancier home out of a desire to keep up with peers can severely hinder one’s financial progress. The same is true for other purchases, both large and small. In fact, for many people, it is the small purchases that ultimately create the biggest problems, particularly when those purchases are made with credit. The wide availability of credit has made it very easy for people to incur substantial amounts of debt in their efforts to keep up with those around them. Making unnecessary purchases can make it difficult to meet one’s savings goals, and these negative impacts are compounded with the use of credit. Ultimately, these decisions can derail a person’s long-term financial plans. Most importantly, there is little evidence to suggest that such behavior will increase a person’s long-term happiness.
Letting Go of the Joneses
Given the potentially damaging effects that can result from trying to keep up with the Joneses, it is extremely important to have strategies for dealing with this all-too-human tendency. Below are some tactics that may help you avoid falling into the trap of keeping up with the Joneses.
Be honest with yourself.
Why do you buy the things you buy? Are they things that you really need? Do they bring you long-term joy? Asking yourself such questions and answering them honestly can help you to better understand the true motivations behind your spending decisions. This knowledge can lead to greater awareness of the impact that keeping up with the Joneses may be having on your financial decision-making.
Focus on your own goals and values.
Think very seriously about what is truly important to you and what you really want to accomplish in life. Does having a fancier car or nicer clothes bring you any closer to those goals? Does a more expensive lifestyle help you live out your fundamental values? Think about your financial goals. Maybe you want to retire early or purchase a vacation home. Do your everyday spending decisions help or hinder your progress toward those goals? Remaining focused on your own values and goals, financial and otherwise, can help you to avoid making short-sighted decisions driven by comparisons with your peers.
Ask yourself, “How much is enough?”
How big of a house is “big enough?” How many cars is “enough?” How much money is “enough?” Most people will have a difficult time coming up with concrete answers to these questions, but simply pondering them can help you realize the futility of trying to keep pace with those around you. If your focus is only on keeping up with your peers, no amount of money will ever be enough. Rather, you will simply find yourself spinning on the hamster wheel, always trying to get more. You should think about what is sufficient for you and your family and remain focused on that, rather than the never-ending struggle for more.
Know your own weaknesses and implement hard limits if necessary.
We all have weak points, and knowing what they are is key to ensuring that they do not cause unnecessary hardship in our lives. Do you sometimes find yourself soothing the pain of a bad day by making unnecessary purchases? Are you someone who finds it a little too easy to get carried away with credit cards? These are very common tendencies, and simply identifying them can help minimize their adverse effects. If you do struggle with these sorts of weaknesses, consider developing a monthly budget with a specific limit for discretionary purchases and then implement measures to curb your actions, such as only carrying a single credit card with a low limit or using cash or a debit card for your everyday purchases. And if you still struggle to regulate your own spending habits, consider asking a trusted friend or family member to help keep you on track. Sometimes willpower alone is not enough, given the intense feelings that are often associated with social comparisons and consumption, so imposing hard limits on ourselves can sometimes be the best solution to these issues.
Remind yourself of reality – your neighbor is probably broke!
Almost no one is immune to the desire to keep up with the Joneses – and that includes the Joneses! While you may think that your neighbors are living the good life because of their outward displays of wealth, the reality may well be that your neighbors are just as frantically trying to keep up with the people around them as you are. It is unlikely that you know the true state of your neighbors’ finances. Though they may appear to be financially better off than you, they may also be drowning in debt. They may be taking far more risk with their investments than is appropriate, and they may be making all manner of poor financial decisions in order to project an image of wealth and security. Thus, the next time you find yourself feeling like you’ve been left behind by your peers, remember that fancy cars and clothes are not wealth; real wealth is what you do not see.
In the final analysis, we are all wired to want to keep up with our peers. It is an entirely natural tendency that has challenged humans for centuries. To make matters worse, modern society, with its glorification of conspicuous consumption and the amplification effect of social media, makes it even more difficult to avoid falling into the trap of trying to keep up with the Joneses. But as previously discussed, there are very effective ways to combat this potentially destructive tendency. And you do not have to do it alone. Your portfolio manager can provide expert insight on your spending habits and develop customized budgeting strategies to help keep you on track.
Ultimately, keeping up with your neighbor will not make you happy, but it might make you poor. So stay focused on your own goals, remain true to your values, and let the Joneses worry about themselves.
This article is prepared by Pekin Hardy Strauss, Inc. (“Pekin Hardy”, dba Pekin Hardy Strauss Wealth Management) for informational purposes only and is not intended as an offer or solicitation for business. The information and data in this article does not constitute legal, tax, accounting, investment or other professional advice. Pekin Hardy cannot assure that the strategies discussed herein will outperform any other strategy in the future, there are no assurances that any predicted results will actually occur.