Keeping up with the Joneses
“Keeping up with the Joneses” refers to comparing yourself to your neighbor as a benchmark for social class or the accumulation of material goods. To fail to keep up with the Joneses is perceived as demonstrating socio-economic or cultural inferiority. The phrase dates back to 1913 when Pop Momand created a comic strip that was published in the New York Globe. In the comic we follow the McGinis as they try to climb the social ladder and compete with the Jones family who lives nearby.
Today, the phrase lives on to an even higher degree of accuracy. No longer do just we have our neighbors to try to keep up with, but we have an ever growing social media universe that brings everyone else's lives right to our fingertips. Easy were the days that we did not know the newest and coolest gadget until the Sears catalog rolled out for Christmas. Shopping seasons have been left in the dust. Black Friday is now just a fond memory of people “door busting” in camping chairs in front of Toys-R-Us at 4am.
What we have now is far more dangerous. We have constant advertising through the various social platforms we all visit each day. A study by USwitch reveals that Americans are spending on average 58 minutes a day on the Facebook app, which is 325 hours a year! This doesn’t include the 2-5 hours a day Americans spend watching TV. With all of this absorbing of media comes a plethora of advertising. What can we do to combat the ever powerful urge to Keep up with the Joneses?
The first thing that I do when I get the urge to go buy something new is I ask myself a few leading questions:
Am I replacing something that already works and is likely to continue working?
Will this advance or distract me in the journey to my goals?
Do I really, REALLY, need this?
The money spent on the item equals X amount of working hours, is it really worth that to me?
How could I better invest this money to get me closer to my goals?
Certainly, there is a time and a place for everyone to buy something they want or need. Perhaps you need to replace your 2019 truck with a 2021 because of a certain towing capability that would make your job more productive and profitable. But if you are upgrading your truck because it has a new feature that lets you plug your phone in and LED lights pop to the sound of your music, this is where I would encourage you to ask yourself the above 5 questions. I am not one to judge anyone on their choices. I would just like to see people make choices that lead them to reaching their goals.
One idea that I like to give people is to let their Assets pay for their Liabilities. This is a great way to be the Joneses and not have to foot the bill. What I mean by this is to obtain or create an asset. As an example, we will discuss a house that will be used as a rental. Here is the breakdown.
You purchase this $200,000 home with a FHA loan and plan to live there for 1 year (to satisfy FHA requirements). Once you have lived there a year, you now have a turn-key property (meaning you do not have to do anything to fix it up. You close on the house and list it for rent.)
Provided by Google
Using the 1% rule (1% of the value of the home is the suggested rental value. This is not applicable in all markets but is a general good rule of thumb when running quick numbers) assume you can rent this home for $2,000 a month.
Chart provided by a rental analysis on www.biggerpockets.com
After you pay your monthly expenses using your rental income you should be left over with some cash!
Chart provided by a rental analysis on www.biggerpockets.com
With this $370 passive cash flow, you can do so many things! You can allow for this asset to pay for whatever liability you would like. If your goal is to create enough passive income to replace your income from the job you are working now, then you will need to buy some more houses. Rinse and repeat this process for as many times as you can! (Usually the banks cut you off at 10 properties. Then you will have to learn how to use private money. . . to be blogged about at a later time)
The process of buying multiple houses requires strategy and diligence. We strongly encourage you to follow our podcast and attend local REIA meetings to help begin the planning of that path.
Hopefully you can use the five step process to think through the things you are wanting to buy in the future and do so with intention! Don’t just try to keep up with the Joneses. Why not become the Joneses? You are in the driver’s seat of your life with the ability to steer in any direction. Do so with extreme purpose!
