Why Keeping Up With the Joneses Means You Can Wind Up Broke

Even though Adonal Foyle was making millions during his 13-year career in the NBA playing center for the Golden State Warriors, he always maintained his strict financial discipline and stuck to buying used cars.

Foyle never adopted the carefree spending lifestyle that other professional athletes embarked on when frivolously buying luxurious clothing and lavish cars and homes endlessly. Instead, he learned from their mistakes and reined in his expenditures, even cutting out $4 coffees for awhile midway through his career and brewed coffee at home.

“You have to be disciplined and trade what you want for something else,” he told MainStreet. “You can’t do everything on a grand scheme. Everything you do has an impact, so you have to understand the opportunity cost and understand the compounding effect of interest.”

Sticking to your own financial budget, like Foyle, without regard for what everyone else is doing is a major ingredient in financial success. Basing your financial decisions on what others think or worshipping certain brands of clothing and cars can lead you into serious debt and a lack of retirement savings. The attempts to mirror what your friends, co-workers or even neighbors are buying results in poor decisions and being overextended with large credit card bills each month.

“Keeping up with the Joneses is a way of life for many families who send kids to colleges they can’t afford and make sure cars are good enough to pass muster with the Joneses all around them.” said April Masini, an advice columnist and author based in New York. “The truth is, the Joneses are smoke and mirrors.”

Instead, people need to be more honest with themselves and not mimic the lifestyles of their friends or relatives.

“It’s very hard for many people to be authentic and say, ‘We can’t afford this,’ and buy the Nissan instead of the BMW or wreck retirement savings to send kids to colleges with big sticker prices because that’s what everyone else does,” she said. “Having the courage to live within one’s means and shop at Target instead of Neiman’s is very difficult for many folks whose self-esteem is reliant on the opinion of others.”

During Foyle’s tenure in the NBA, which included playing for the Orlando Magic and Memphis Grizzlies, he was an ardent fan of Quicken despite the fact that he had once signed a six-year, $42 million contract with the Warriors, and diligently inputted all of his expenses and purchases.

“It teaches you to look at your finances monthly and allows you to adjust your budget if there is a more efficient option,” he said.

The mixture of paying a jock tax in every state you play in, wanting to be a trend setter and owning several cars, homes, planes and designer clothing, along with paying child support, means that athletes can easily overdo it, said Foyle, who is now the community ambassador for the Warriors and participates in programs to support the Bay Area community.

“You’re not a person anymore, because you are a corporation and wind up in the highest tax bracket,” he said. “Athletes want the newest and best and are very interested in Hollywood and fashion and want to be part of that.”

Athletes need to realize that unlike other people, their careers are short-lived and they can not rely on immediate gratification “all the time,” said Foyle, who discusses how athletes and average Americans should manage their money in his book, Winning the Money Game: Lessons Learned from the Financial Fouls of Pro Athletes

Since professional athletes are often elevated to their status at a young age, the need to fit in with other players can be alluring, even if they didn't sign a multi-million dollar star player contract and many fall prey to "conspicuous consumption to let the world know I have arrived," he said.

Very few athletes realize that the average basketball career is less than five years while the average football career is even shorter at three years or less. Another startling fact is that 60% of NBA players are broke within five years of retirement and nearly 80% of NFL players have little savings left within two years of retirement.

“Don’t do stuff to keep up with someone or you will have to forgo something else,” he said. “Or do something to add value to your life.”

The pressure to follow the herd and own the latest trendy clothes or electronics is common among both men and women. In college, Chris Navalta’s classmates and friends had the “coolest shoes” and even though they were not a brand he wore, he still coveted owning a pair. In the end, he wound up spending money on four pairs of shoes that “I didn't even think looked good on me,” he said. “A couple of them were a size too big, because they didn't even have my size. It didn't matter, because I wanted them and eventually I racked up close to $1,000 in credit card debt.”

The lackadaisical attitude toward money and desire to purchase the latest items of the masses has long vanished, said Navalta, who is now a San Francisco-based public relations supervisor in the tech industry.

“I'm much more responsible with my finances now,” he said. “I'm past that age where I need to keep up with the Joneses.”

Instead of making extra credit card payments or maxing out the contributions to their retirement portfolio, some people are chatting on the latest iPhone and spending over $100 each month or leasing expensive cars, because the lower monthly payments “appear” to fit into their budgets, said Howard Dvorkin, a CPA and chairman of Debt.com, a Plantation, Fla.-based financial advice website.

“That's over $1,000 a year and these phones don't just cause financial problems,” he said. “People become obsessed with them - people don't need people. They just need their phone.”

Pay Down Debt, Save for Emergencies

A large majority of consumers should be paying down their credit card debt, saving up an emergency fund or paying off their student loans, but “that's not sexy,” Dvorkin said. “That's where the keeping up with the Joneses and financial responsibility butt heads. One is sexy. The other is boring and hard work.”

Establishing a three- to six-month emergency fund is a necessity much like buying auto or home insurance.

“Many Americans don’t have an emergency fund because they think they don’t need one, but people need to consider what would happen if they suddenly found themselves with a $2,500 repair bill or worse, without an income,” he said.

Consumers should commit to saving a minimum of 5% of their income for both short-term emergency savings and retirement. Take advantage of your company’s 401(k) plan, especially if the company matches your contribution and aim for opening an IRA or Roth IRA account in order to diversify your assets.

“Don't just contribute and hope your money will grow,” Dvorkin said. “Familiarize yourself with your savings interest rates, as well as how and where your money is being invested through your retirement accounts. The culture of living for today has led us down a dangerous path where most Americans aren't ready for retirement. ”

Prudence and and analysis of needs versus wants can help consumers make the right choices for their finances, without going down the slippery slope of trying to keep up with the Joneses.

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