USAA Tips: Forget the Joneses

Content provided courtesy of USAA | By J.J. Montanaro

Fighting the urge to keep up with the Joneses is a never-ending battle. My thought and theme for 2018…forget the Joneses. I know it can be hard to do. Heck, we recently moved into a new home and I – even though I know better – find myself walking through other peoples’ houses and houses under construction thinking about what we woulda, coulda, shoulda – and still could do, if we get caught up in the Jones race.

However, if you look around, you’ll quickly recognize that the Joneses are setting a financial example extraordinaire; an example of what not to do. Let’s examine some of their fantastic – dripping sarcasm – work on the financial front:

They are powering economic growth. With roughly 2/3 of our economy powered by the American consumer, the economy is in good hands. Earlier this year personal savings hit a 10-year low of 2.4%. That’s plain pitiful. If you’re in your early 20’s and just getting started, you can probably get away with saving 10% for retirement, but most people have a variety of goals that will require even more saving. So, the Joneses and their 2.4% savings rate is a joke.

They’re playing the “how much payment can you afford” game with the car dealer. Ever wonder how the Jones family affords that never-ending carousel of slick new vehicles? Maybe they can’t. Instead, much to the appreciation of their car salesman, they are stretching out car loans to the point where the payment is “affordable.” Every quarter, Experian produces a “State of the Automotive Finance Market” report. The latest indicated the average new car loan was over 69 months. You know how averages work and that means there are a whole bunch of loans out there with terms longer than 69 months. Shoot for an un-Jones like approach, something that’s affordable with a loan of no longer than 5 years.

They can’t be bothered with life insurance. The Jones family apparently doesn’t need any stinking life insurance. Three kids, a big mortgage, a couple car loans and a lot of underfunded financial goals wouldn’t even phase the survivor if the unthinkable happens. That probably sounds ridiculous, but according to LIMRA, there is nearly $2 trillion in unfunded life insurance needs out there. The Joneses are clearly skimping, you shouldn’t.

They’ve got plastic in hand for the next emergency. In January, the Bankrate Financial Security Index reported that 61% of Americans surveyed would be unable to draw from savings to respond to a $1,000 unexpected expense. They’d be forced to borrow from family, sell stuff or break out the good old credit card. Another not-so-enviable trait of the Jones crew, but a boon for credit card companies.

So, in a nutshell, here’s a short, sweet (bitter) and I hope compelling case against trying to keep up with the Joneses: They are going backwards.