Consumerism or Financial Security | Stepping Stones to FI (2024)

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Those of us with kids in team sports know the drill. No matter how your child or the team performed throughout the season, each player takes home a team “participation” trophy. They get the pizza party and the cupcakes, the speech where their coach lists off all the great individual traits your child brought to the team. But if your child’s team came in last, should they still go home winners? On one hand, we don’t want hurt feelings and we don’t want to discourage kids from their athletic endeavors. But on the other hand, shouldn’t kids learn what failure feels like and how to cope with it?

Somehow it was decided that the current norm is to hand out team trophies. Regardless of how the team actually performed. And this is exactly the mentality that the majority of Americans have about finances.

Every time you buy a new car or buy that dream home, all you are doing is giving yourself the team trophy for the sport of life. A huge portion of American society is losing terribly but we are led to believe that because we have the trophy, i.e. the latest styles or the newest car, everything is fine.

But everything isn’t financially fine. The vast majority of us aren’t winning at our number one sport.

Not even close.

But society tells us that the nicer the possessions, the more successful we are.

Keeping up with the Joneses is a vicious cycle. The more money we make (the more successful we are), the more our expenses increase. The cars get nicer, the home gets larger. The kids need to play travel soccer and wear the trendy clothes that all the other kids are wearing. We do what we are supposed to do. We save, we put away for retirement. We studied hard and have that great job. So why aren’t we really getting ahead?

Let’s take a look at the typical Middle-Class American and what their finances might look like.

Meet Joe and Rebecca

Joe and Rebecca have two kids. Joe is an attorney and Rebecca in a nurse. Joe comes from a family of attorneys and has high expectations for his kids, they need to go to the best schools possible, so they attend private school about 6 miles from home. Rebecca works part time so that she can get the kids to and from school each day. They also want their kids to be active and keep up with all the other kids in the area, so they each play team sports.

Here’s a rough outline of their monthly finances:

Here’s a link to my Income and Expense Tracking for Joe and Rebeccaso you can check my math.

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As you can see, Joe and Rebecca make a lot of money! However, at the end of the month, after what seem like normal expenses that similar families are experiencing, they are short $250! Hence the credit card debt.

So is this family winning or losing at the game of life?

On the exterior, they have a beautiful home (bought with an approved bank loan because, according to the 30% home affordability rule of thumb, monthly payments make up less than 30% of their gross income), they drive nice, safe, reliable cars and life is good. They are putting away 7.5% of their income for retirement. They should be able to retire comfortably when they are….. Well, they don’t really know when that is, but since they are contributing and their employer offers 50% matching, I’m sure they are on track to retire eventually.

This story is not uncommon. If you do a quick google search on how many Americans live paycheck to paycheck, you’ll find that the percentages range anywhere from 49% all the way up to over 80%. According to a survey by CareerBuilder, 49% of all Americans live paycheck to paycheck and 10% of people earning over $100k are still living paycheck to paycheck. This isn’t a lower class problem. It affects even Upper-Middle Class earners. In most cases, it’s completely avoidable and comes down to financial education. Education that is not provided in school.

To make matters even worse, discussing personal finance is considered social taboo. So if no one is teaching kids and young adults, and it’s socially inappropriate to speak about finances openly, it’s no wonder that so many of us are losing terribly at life. To top it off, society is awarding this financial negligence. Every time Joe and Rebecca show off their beautiful home and fancy cars and bright kids with their private school education, it’s like bringing home that team trophy. I would argue that they haven’t earned their trophy yet.

But they easily could. They could be on track to retire in just 10 years! Maybe even less if they want to explore some budgeting and investing options. We will revisit Joe and Rebecca inHow to Calculate Your Savings Rate – And Why You Need To and see just what changes they can start now to turn their finances around and win that trophy.

Recap:

• Distributing team participation trophies in youth sports is controversial.
• I’d argue that it only sets unrealistic expectations in the future.
• Keeping up with the Joneses is rewarded in our society.
• And yet, keeping up with the Joneses is preventing families from retiring years, or decades, earlier than they otherwise could have.
• This is like taking home the financial participation trophy.
• Overspending should not be rewarded, this only sets the vicious cycle of continuing to spend more and never truly making progress toward retirement.
• Please don’t be like Joe and Rebecca.
• The praise over the fancy new car is not going to fund your golden years.
• Look after your financial education and put in the work to win the real prize, the financial freedom trophy.

Action Steps:

While this may feel uncomfortable, reflect on how you felt while reading this post. Did you relate to some of these financial mistakes? Do you often feel the societal pressures of consumerism? The more money we earn throughout life, the more opportunity there is to spend. Take some time and honestly assess areas where you are overspending. Does spending money on these things bring you and your family fulfillment? If not, what are some changes you could make?

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