Keeping up can kill your savings

Meet Lucy. Lucy and her husband, Don, have a great life. They’ve lived well, managing their money carefully and building up quite a nice little nest-egg. Their home is paid for, mostly because Lucy and Don have always driven older models cars, shopped carefully for their clothes, and made do with not quite the latest cell phone, television and appliances.

Lucy recently got a new job. Now she’s working with a group of people who come from money – old money, and lots of it. So Lucy is feeling some pressure to keep up. While she’s been content to brown-bag lunch for most of her working career, her new work peers eat out often. And they like expensive restaurants. Lucy is making good money, but if she tries to keep up, she’s going to have a lot less money available for saving.

Lucy tried eating out a couple of times a week, using her workload as her excuse for eating her lunch at her desk the rest of the time. But when her work mates come back from lunch having discussed a work issue, coming up with a plan into which she’s had no input, she feels at a decided disadvantage.

The dilemma isn’t very different for Caroline, although the circumstances are not at all the same. Caroline has been hanging out with the same bunch of girls ever since high school. Two of them married very well, and the third has been extremely successful in business. In fact, Caroline is working for her friend, Judith. Problem is, when the girls head off on vacation together, which they like to do a couple of times a year, Caroline has to put her portion on her credit card, which she can’t afford to pay off. The debt has been building for years and Caroline is at the point where she’s putting her family’s financial security at risk for the sake of keeping up with her posse.

Higher incomes often come with higher expectations – a nice house, a new car, and myriad social events. And if you’re hanging with a crowd that’s significantly above your social status, you may always feel like the poor cousin. Or you may be “driven” to spend money you should be saving.  That’s one reason why people making solid incomes often default to using credit to keep up with what they think they should be able to afford.

You know the old saying, “It’s not how much you make, it’s how much you keep.” Income is only the issue when people make so little that they can’t keep body and soul together; then they must make more money. But for most it’s a matter of knowing what’s truly important and sticking to your guns. Income is, after all, only part of the equation. Inflated expenses can go through a big income faster than green grass through a goose.

If you build a life around keeping up, you’ll always struggle with how to save. If that’s the path you choose, just don’t whine about it. You can live your life for YOU and be healthy. Or you can struggle to keep up and flounder. It’s your choice.