Adult peer pressure is a real thing: I’ve been told that one in 10 Americans tell the other nine how to vote, where to eat and what to buy. Of course, if you are like me, you’re thinking, “Not me! I think for myself!” But let’s not be so confident. Our friends (on and off Facebook) do influence our thinking.
It’s time to acknowledge that the people around us do influence our spending habits. Working with a financial advisor (San Antonio) can help hold you accountable and better spot peer pressure when it’s happening.
Be especially aware of peer pressure when considering these 7 purchases:
1. A New Vehicle
I know that for many people, their identity is tied to the car they drive. But we must get comfortable with what we can afford regardless of what our friend or neighbor just bought. Let someone else struggle to make a $700 monthly car payment. The real question should be: Can I afford this? If not, life will catch up and you’ll more than likely regret the purchase.
2. Children’s Education
There is a debate among parents between private school, public school and homeschool. I’m agnostic in this space because I see authentic merits for all three. However, I will say that one way is not the best move if you can’t afford it! Don’t get trapped because all your friends are moving in one direction. Not getting into debt does not make you the neighborhood fool. Stand firm on what you can afford.
Getting the latest gadgets can be like an addiction. But remember this: If you waited five months for the Nintendo 3DS, you could have saved $80. Be patient with technology. It’s much easier than trying to keep up.
4. Going Out
According to the Bureau of Labor Statistics, the average American spends about 1 percent of their income on alcohol. Even if you aren’t drinking more than last year, your alcohol bill will likely go up every year as the price and taxes associated with this market continue to rise with the demand. Be cautious and develop habits of self-control.
But going out doesn’t just mean for happy hour.
According to the United States Department of Agriculture, the average monthly cost to feed a family of four at home on a moderate budget is $883.10 per month. The same family is likely to spend another $500 dining out each month. That’s a lot of money!
At-home dinner-table eating is not cheap by itself. But when it’s mixed with irresponsible restaurant dining, life can get out of control quickly.
Remember that restaurants typically mark-up items 300 percent and then expect a tip for the waiter and sales taxes. It is critical that you put a dollar cap on the convenience of dining out. It is becoming the thief of financial progress.
As a financial advisor in San Antonio, I have had to have difficult conversations with clients who say, “I just don’t have the cash to pay down debt, save or give,” when I know that they spend way too much on dining out.
5. Social Club Memberships
Gym memberships and country clubs can be costly. It’s not only the monthly bill, but the ancillary costs such as dining and social functions. If you aren’t prepared financially to afford the social influence of these organizations, wait before you join.
6. A New Home
Your home mortgage should be no more than 25 percent of your take-home pay, yet many people quickly get caught up in the dream of a home they can’t afford because of the “Keeping up with the Joneses” syndrome. Home-makeover shows can add to this unrealistic fantasy. But what you may not know is that your buddy with the nice house down the street made the down payment with money inherited from his late grandma.
Don’t try to keep up. Stick with your own personal budget.
Homeownership can be a beautiful thing, but it does come at a price. There’s the mortgage, of course, but when buying a home, you should also consider how you will fix the air conditioning if it goes out or repair holes in the walls.
The character Walter Fielding in the movie “The Money Pit” said it best: “Here lies Walter Fielding. He bought a house, and it killed him.”
You can’t predict the future perfectly, create a budget for homeownership and expect it to be perfect. However, if you create a plan, you can increase your probability of success.
It is hard not to covet the vacation Facebook posts, but don’t get sucked in. Memories can be made with weekend road trips and a picnic blanket. In fact, that’s the way many of us in the middle class really vacation.
Paying Off Debt
TransUnion claims that the average credit card debt is $4,878 – and growing. According to Experian, the average car loan is $30,032. If you add to these numbers another $26,700 of student debt, according to the New York Fed, that’s about $61,610 of money burden. It’s financially expensive and mentally exhausting to be an average borrower in America today.
So, how do we get out of all this consumer debt?
The debt snowball is an excellent approach to destroying debt. I have seen it work many times. The snowball effect places behavior above math. In essence, you focus the majority of your cash flow toward the smallest balance first, and then snowball that payment into the next smallest balance. As you experience these little wins, you will more than likely gain the momentum of hope to become completely debt free.
If you want peace with money, get angry at debt. Debt needs to be an enemy. I’ve been down the road of drowning in debt. I made a commitment to fix it. I’m proud of my commitment and I’m pleased with the results. It took years of discipline to get out of debt, but it was worth it.
It takes maturity and awareness to prevent the influence of peers from robbing our wallet. Be the hero of your family by not becoming a conforming spender. Talk with a financial advisor (San Antonio) and get on the right track to financial freedom.
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