Why Americans Are Staying Broke…

I'm going to help us figure out another reason why Americans are broke. Number two on our list says, "Daggum Jones," I mean, I don't know who let these people move in down the street. The worst neighbors! As soon as they moved in, it seems like Americans lost their minds trying to keep up with them. That's exactly right. We, as Americans, all fall prey to what's noticed as conspicuous consumption. Maybe that's a vocabulary term you've never heard of, or something you're not familiar with. Conspicuous consumption is the act of purchasing goods or services simply for the purpose of displaying one's wealth or prestige. You are literally trying to show off, and in the world of the Joneses, all we care about is, do the Joneses see that I have the same thing going on that they have going on? I want to prepare you for an "old man on the front porch" moment here. I'm actually happy that I'm part of Gen X because we are of the age when I grew up. The only people you knew who were wealthy, besides Robin Leach in "Lifestyles of the Rich and Famous," were the people in your community, your neighborhood, and the kids like you that surrounded you at school. We had no idea whether we were rich or poor. And I think that actually helped us because the fact that you couldn't compare yourself to what social media brings everyone. I mean, it wasn't until I got to college that I was like, "What? People have what?" I mean, it was just one of those things. I grew up from kindergarten all the way up till I went to college. I thought we were fine, even though we were lower middle class all through my childhood. And my dad even lost his job in his 40s and still never felt poor until we got to college, and I was like, "Whoa, this is what people with money look like." And I feel like that has been brought forward to everybody through social media. It's one of the negatives out there, that comparison is definitely a lot more in your face. And it's not even just the anecdotal story. Again, the data from the Atlantic shares that households that were exposed to more spending by the wealthy neighbors were more likely to experience financial distress themselves. AKA, they're trying to keep up with the Joneses. And there's even a positive relationship between the income of a state's richest households and the number of bankruptcies in that state, meaning that the wealthier the households are, the higher the level of bankruptcies. This is because of conspicuous consumption. This is because people are trying to spend for the sake of everyone else seeing how wealthy they are. Well, I think there's a disconnect because there are a lot of people, even people who don't have the resources, who think that when you reach a level of success or you start having some financial accomplishments, you should go show people what it looks like. But the reality is, and we know this, we put it on the slide, where we show you the richer people are, the poorer it sometimes seems like they look. You know, we could give the example of Zuckerberg, when you talk about Jay-Z. I mean, there are so many examples. Instead of trying to look rich, I want you to start acting like true wealth. That's a perfect segue. Let's talk about how you can do it better. The first thing is to know what wealthy people actually spend their money on. It's not the flashy things, the fancy watches, the fancy cars, the fancy houses. Understand where value exists, and wealthy people spend money on things that they value, not things that they perceive other people value. Yeah, the typical wealthy people are not there by buying fancy cars, fancy watches. There's actually a lot of research that shows that people who are on the lower income spectrum actually spend more money on fancy exotic brands, like Rolex watches, than even wealthy people do. Another thing you can do is choose to be wealthy, actually be wealthy, overlooking being rich. Make sure that you're surrounding yourself with people who care more about your savings rate and future building, rather than the car in your garage. You may say, "Oh man, that's hard. Me and my neighbors, we don't talk about money, we don't talk about the balance sheet." Well, we have a community for you. If you're not a member of our Financial Mutant Facebook group, go to moneyguy.com and figure out how you can become a member of that group. Because it's all like-minded people who are sharing this type of information. It's the people who care about actually being wealthy, not just looking wealthy. I want to get back to the root of what's going on with this keeping up with the Joneses. First of all, comparison is the thief of joy. And I want you to just repeat this after me: Someone is always going to have more money than you, and someone's always going to have less money than you. I deal with way too many people who make great incomes and, by all measurements, should be completely happy with where they are from a financial perspective. But because of their peer group, they actually think they're poor. I know that sounds ridiculous, but I'm just telling you to be careful. If you are running with a group and you have this comparison that always makes you feel like you're the poorest person among everyone who surrounds you, you're probably not doing it right.