The grass often seems greener on the other side. But perhaps your neighbors aren't as financially secure as you think.
This article by Vincent King originally appeared on MoneyNing.
You look out the window of your home each night after dinner, staring across the street at your neighbors. You long for the cars they drive, their weekly manicured lawns, and even the vacations they seem to take several times a year.
You’re not alone.
I often look out my window too, staring at the gorgeous homes and cars, wondering how they manage to pay for them. After all, we live in the same neighborhood, our kids go to the same schools, and their salaries aren’t that much more than ours.
There are several reasons our neighbors can afford so many of the things we would love to have but could never fathom splurging on:
1. Perception is everything
Your perception may be skewed. You see fancy cars in the driveway, and the trim lawns you can almost feel between your toes. You watch work crews going in and out of the awesome remodeling projects happening inside. Yet, none of that means your neighbors are wealthier than you. Just because you see them as more affluent, doesn’t mean they are.
You are only able to see above the surface of their spending, meaning you have no idea what’s happening down below.
2. Allocation is essential
While you choose to consistently save money for your kids’ education, and retirement later in life, they are spending what they believe are excess funds on their cars and homes. They might be making the shallow choice to spend their money on what people can see, while you are spending your money on the life you want to live. You choose to pay for peace of mind.
It’s how your neighbors allocate their income that makes them seem richer than they are.
3. Perks matter
While your neighbors’ salaries might be slightly more than yours, it isn’t enough to justify the massive leap in spending. However, fringe benefits can greatly widen the gap. Perks such as cars, phones, and laptops can give the recipient an amazing leg up when it comes to freeing money for other pleasures.
4. Luxuries of the mature
As families mature, houses get paid off and savings grow. Even if your children do go to the same school, their children are older, and they have a few years on you as well. Those could be years spent paying off their house and putting money in the bank.
5. Their lives might be plastic
Your neighbors might be disciples worshiping the power of the plastic. While you are smart enough to understand the headaches of undisciplined credit, your neighbors might be living carelessly, buying short-term luxury today in exchange for a meager tomorrow.
6. They know where to find deals
I consider myself a connoisseur when it comes to finding great deals on groceries and kids clothing. Perhaps your neighbors also know something about finding deals on the things they need, freeing up more money for things they want.
7. They pay for their immediate wants first
Your neighbors could also have more money than you because they prioritize differently, and pay from their savings for projects and luxuries that they want done.
While my neighbors may or may not have more money than I do, I don’t let it influence the way I live. I spend money in the way that’s most important for me and my family, both for a better, more comfortable today, and for a brighter tomorrow.
As “The Millionaire Next Door” and “Rich Dad, Poor Dad” point out, those who spend on things like homes, cars, and clothes are spending on material items and living on “rented” lifestyles. Instead of building assets, these people are living on liabilities, and that can be a dangerous mindset. You don’t want to live like a king today if it means you’re going to live like a pauper tomorrow.
It doesn’t matter what the Joneses are doing. Not now, or ever. Save where you can, spend where you need, and live the life you want.