High Cost of Keeping up with the Joneses

There is a family that is famous all over America for maintaining the appearance of wealth for the benefit of others.

You know them as the Joneses. They have the big house, a boss car and a 108-inch flat-screen television they flaunt at backyard parties during football season.

They are extremely popular in your neighborhood, and everyone else’s for that matter, because neighbors venerate their consumption and use them as a measuring stick for success.

“Keeping up with the Joneses is what America is all about,” financial consultant Tarra Jackson said. “People get all caught up living the lifestyle of their dreams, not the lifestyle they can afford.”

Not surprisingly, there are a lot of financial casualties in the battle to keep up with the Joneses. There have been 14.9 million foreclosure filings and 8.7 million bankruptcy filings since 2007. Not all are attributable to attempts to keep up with the Joneses, but Jackson thinks many of them are.

“People are trying to buy status, and all they’re really doing is going further and further into debt for the sake of appearances,” Jackson said. “They make a good living, but they have nothing to show for it.”

That is where Jackson, also known as Madam Money, wants to jump in.

She’s a money manager, life skills coach and motivational speaker who run her own website. One of her favorite subjects is not keeping up with the Joneses.

“I’m in the business of raising people’s financial IQ,” she said. “I don’t want them to spend for the sake of appearance. I don’t want to see them living paycheck-to-paycheck. I want to teach them how much they can afford to spend, and how much they need to save for the rainy day.”

Three Areas to Improve Personal Finance

Jackson says there are three things people know about personal finance, but really don’t do much with to improve their standing:

• Credit score: “People don’t understand how credit scores are calculated. They don’t know what to do to improve their credit scores. There are a lot of so-called “credit repair” companies out there doing a lot of things you could do for yourself, if you knew it was available.”
• Savings: “This one is really difficult because nobody saves anymore. I start people with the “jar method” of putting whatever change you accumulate during a day into a jar, and not touching it until the end of the month when you bring it to a bank and deposit everything there. Once they see some success in saving, they start putting $1 and $5 bills in there and pretty soon, they’ve acquired the habit of savings. Next thing you know, they start putting five or 10 percent of their paycheck to savings, which is something everyone should be doing.”
• Rock Bottom (as in, don’t hit it): “Some people see the writing on the wall and get help before it’s too late, but too many people wait until their car has been repossessed, their wages are being garnished, or they lose their home to foreclosure before realizing they’ve hit rock bottom. Trust me; you don’t want to go there. It’s excruciatingly painful. I know.”

Yes, she does know. Jackson spent some time in the Joneses neighborhood and it did not end well.

She bought a home in Delaware at the height of the real estate boom, but soon afterward, left for a job in Atlanta. She tried to keep residencies in both places, but couldn’t handle mortgage at the old house and rent on a new place. By the time she put it on the market, it was underwater.

She asked the bank for a loan modification to give her some breathing room, but when the bank’s officials calculated her income and expenses, they told her she could afford both places. Her paycheck and expenses said otherwise. The two sides argued over it for months before Jackson finally asked the bank, “Where do you want me to leave the keys?”

Her home went into foreclosure. Her credit score plummeted. Her self-esteem took a dive as well. How does a person with 20 years of experience in the financial industry let something like this happen?

Life After Financial Death

“It was a very painful, emotional experience,” Jackson said. “I had significant equity in that home when I started, but it went underwater and never was going to swim again.

“I got too emotionally involved. I was desperate and didn’t deal well with the psychological aspects of a situation like this. I could have done some things that would have turned that into a successful rental property, but that’s hindsight now. I learned a lot from the experience.”

She uses the experience to relate to her audience in lectures, seminars, books and one-on-one meetings. The Great Recession forced a lot of people who never thought they would be dealing with foreclosure, repossession, job loss and even bankruptcy, to work their way through or around those financial potholes.

“I’ve got a passion for helping people deal with the changes the economy is forcing them to make in their lifestyles,” Jackson said. “I understand the rules of the financial game, the policies and procedures.

“The main thing people have to understand: There is life after financial death. You just need a professional who can motor you through the process.”