Keeping up with the Joneses and Social Spending

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“Keeping up with the Joneses” refers to benchmarking oneself vis-à-vis your neighbors or social circle when it comes to material goods or social class. This idiom dates back to a comic strip that started in 1913 and ran all the way to 1940. While social climbing and keeping up with your neighbors is mostly seen as a bad thing, it is a challenge to turn a blind eye to social benchmarking and wanting to know where you stand. Are you doing well? Should you be doing better?

Useful Cases for Benchmarking

Am I being fairly compensated for my work?

Wanting to benchmark yourself can have a positive and meaningful impact, especially when it comes to your human capital, i.e., how much you earn. Glassdoor and other sites can offer insight into compensation for others performing the same job as you. If your salary is less than your peers, you should ask for a raise. Being under paid is especially true for women, and this data can be useful with negotiating your next job or at your next performance review.

Am I spending too much money on basic needs?

It can be helpful to put lifestyle in perspective depending on where you live and know how much it takes other families to live in your area. For example, rent for a two bedroom apartment in San Francisco averages $4,423 (as of February 2018, Rent Jungle). For comparison, a two bedroom apartment in San Diego averages ~$2,200, and in Phoenix average $1,100.

The average Bay Area family spends ~$900-1,200 per month on groceries and an additional $450-700 on eating out. Knowing where you stack up in these ranges can help your family budget better and potentially spend less in these areas.

Can we afford to live here?

If you have childcare and live in the Bay Area, it tends to cost you about $15,000 per month to cover expenses. This roughly equates to earning $270,000 gross as a family. This is up from five years ago when a family needed to gross closer to $250,000. You can certainly make less and still live in the Bay Area, but usually you spend very little money, have a steal on housing or have family close by that is able to provide childcare.

Social Spending

Social spending is a nice and non-judgmental way of referencing keeping up with the Joneses. This is the money you spend on things like vacation, eating out and material goods that is not based entirely on your goals but on what those around you are doing.

For example, two families you really like are heading up to Tahoe for ski week and have asked you to go in on a rental. You hadn’t planned on taking a trip that week because you really want to go to Hawaii for spring break, but you also really like these families and feel like if you say no you will have FOMO (fear of missing out) and deprive your kids of amazing childhood memories with their friends. So, you say yes and end up spending close to $4,000 for a trip you hadn’t planned to take. You have already booked most of your Hawaii trip, so in the end you spend close to $10,000 on travel and the year isn’t even half-way over yet. You start to stress out about paying for camps and what the heck you can afford to do over summer break.

Social spending rears its head more commonly in eating out. For those of us making under that $270,000 level, spending at restaurants needs to be watched more carefully. I hear a lot of comments from clients that they didn’t intend to spend that much money on eating out, but they had a date night with friends and ended up at Farm Shop or Picco where they dropped $250 on a Friday night and another $100 on babysitting. More often than not, the couple says that spending that money stressed them out and made the evening not fun.

How to Prevent or Reign in Social Spending

The first step is to be honest and recognize if you tend to socially spend money, and if yes, where do you tend to do it: travel, shopping, eating out, kid’s activities, etc.

Second, spend time determining your financial goals and budget so that you have something to target. If you don’t have a plan for how much you want to spend on travel, it’s hard to relax when you start buying plane tickets and booking hotels. When opportunities for travel come up that are outside your plan, you can more easily say no. Your out is that “it isn’t part of your travel plan for the year.” Sometimes it is hard for friends to hear no, but stick to your plan and find a less expensive way to spend time together.

Envy and a sense of entitlement are powerful forces that can suck you into spending money where you hadn’t intended to spend it. This is where it is time to be a grown up and just say no. If your friends are not supportive of your decision, ask yourself why. Often times the other couple probably shouldn’t be spending money the way they are and have shame about it. That’s not your problem. Focus on you and your family. Have a plan for your money, and spend on what matters most to you.

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