Have you ever noticed that you become like the people you spend time with? The longer you’ve had a relationship with someone, whether it be a family member, friend, or neighbor, you tend to pick up their habits and tendencies and be drawn to their hobbies and passions. There’s nothing inherently wrong with this, except when it comes to your finances.
By nature, we compare ourselves to others and care about what they think. We want to make sure we are on the right track and heading in the right direction in life, so we turn to others (and their lifestyles) to see if we measure up. Many times, this influences the way we live our lives, the clothes we wear, the cars we drive, and the vacations we go on. If you can support your ideal lifestyle, that’s great! Unfortunately, there are times when we disregard our own personal finances just to keep up with the Joneses, and this can have disastrous effects for years to come.
If you spend some time searching for retirement advice online, you’ll probably see information that tells you that there is a specific dollar amount you should have in your accounts before you retire. But the truth is, what you need is completely dependent on the lifestyle you want to live now and how you want to live in retirement. Just because you have the money today does not guarantee it’ll be there down the road.
Here’s an example. I once worked with a client who seemingly had everything in order. This gentleman was a business owner of a medium-sized company that had been in business for well over 20 years. He was making over $1 million a year, but when we started doing some financial planning together at age 63, we found out that he would need to work for much longer than he had hoped. Why? Because he spent too much money trying to keep up with the Joneses.
In this case, the “Joneses” turned out to be his best friend, also a successful business owner, but one who earned $2 million a year. My client ended up spending everything he made to keep up with his best friend, leaving him with nothing to save and not a penny to put into his own 401(k).
While this is one of the more extreme situations I have encountered, it shows the danger of this mindset. The takeaway is that it doesn’t matter how much money you make but what you do with it and the wisdom of your decisions. It’s great to have hobbies and exciting events to look forward to, and it’s healthy to be able to unplug, relax, and enjoy life, but don’t do it in a way that jeopardizes your future.
The good news is that it’s never too late to start planning. At Point Wealth Management,our job is to help people figure out how much money they truly need to do all the things that are important to them, both now and in retirement. Our process makes it simple to stay on course so you can retire when you want, how you want. Do you need to stop keeping up with the Joneses and create a custom plan for your unique financial situation? We’re here to help. Schedule a call and meet me virtually, and together we’ll help make sure your future looks bright.