Keeping up with the Joneses: What it might be costing Americans

Katie Kelton | (TNS) Bankrate.com

Jamie Feldman, 35 years old, lives in Brooklyn, N.Y. and is currently paying off nearly $20,000 in credit card debt. She’s also the co-host of Debt Heads podcast. After being laid off during the COVID-19 pandemic, she maxed out a credit card while spending to keep up with her social life.

“It was a lot of social commitments,” Feldman explains. “A lot of weddings, a lot of expensive dinners in New York with friends who were making more money than me, a lot of inability to say no to things even if I couldn’t afford them or didn’t want to do them.”

She thought of her debt as something she would deal with later — until later came, and she was in over her head in interest charges and minimum payments. Feldman made a decision to stop shopping and dining out for one month to see how it affected her budget.

“Unsurprisingly, it made a huge difference,” she says. “It was the first time I was really looking at my finances and seeing where my money was going, what I was spending it on and what I was bringing in.”

Feldman isn’t the only one who’s swiped a credit card to keep up with the Joneses. But overspending on a credit card can have a high price.

If money’s tight, it can be tempting to overspend — or even go into debt — to pay for the same things your peers have. But keeping up appearances is rarely worth the cost.

Americans are in debt, and here’s what they’re spending it on

More than 2 in 5 (44%) credit cardholders carry a balance from month to month, according to Bankrate’s Chasing Rewards in Debt Survey. But around 2 in 3 (67%) of those folks still chase credit card rewards. Could Americans also be using debt to chase the status quo?

Based on Bankrate survey data, here’s what Americans are paying for:

— Fun purchases: More than one-third (38%) of Americans say they would go into debt for a fun purchase this year, according to Bankrate’s Discretionary Spending Survey. Specifically, 27% would be willing to take on debt to travel, 14% to dine out and 13% to attend a live entertainment event.

— Summer travel: More than one-third (36%) of people planning to travel this summer also plan to take on debt to pay for it, according to Bankrate’s Summer Vacation Survey. And 62% will use a credit card for at least some trip expenses. That includes cardholders who plan to pay off the card in full and those who plan to carry a balance.

— Social media purchases: Nearly half (48%) of social media users have made an impulse purchase of a product they saw on social media, according to Bankrate’s 2023 Social Media Survey. One in 5 (20%) say they’ve felt negatively about their financial situation after seeing posts from others on social media, and 9% say social media has had a negative impact on the way they manage their money.

— Buy now, pay later: Around 2 in 5 (39%) Americans have used at least one buy now, pay later (BNPL) service, according to Bankrate’s Buy Now, Pay Later Survey. Further, 29% of BNPL users say they’ve spent more than they should have.

It’s worth noting that 56% of Americans define financial success as living comfortably — more than being a millionaire (13%) or living debt-free (41%), according to Bankrate’s Financial Success Survey. But only 11% of Americans with an idea of financial success say they’ve already achieved it.

Overspending affects Americans’ mental health

This surge in credit card debt may be more complicated than a nationwide desire for stuff. It’s true that inflation is high and purchasing power is low.

Nearly half (47%) of Americans say money has a negative impact on their mental health, including anxiety, stress, worrisome thoughts, loss of sleep and depression, according to Bankrate’s Money and Mental Health Survey.

Those people cited concerns like inflation/rising prices (65%); being in debt, such as credit card debt, medical debt or student loan debt (47%); and not having enough discretionary spending money (43%).

Feldman explains that, while she was accruing credit card interest and only making minimum payments, her mental health was suffering. “In many ways, I think we’re set up to be in debt in this country, based on social expectations and advertising,” Feldman says.

It’s also worth noting that not all debt is bad debt. Certain types of debt can be used to invest in a house, a business or an education that can grow your net worth.

Keep in mind: There’s a difference between keeping up with the Joneses and simply trying to make ends meet. If you’re struggling to pay for housing, groceries, gas and other basic needs, consider seeking out assistance programs or nonprofit financial counseling.

How to avoid the trap of living beyond your means

If you’re maxing out your budgets on “wants,” not “needs,” it might be time to look at your spending habits. Here are a few tricks for living within your means.

Deinfluencing

The deinfluencing trend has popped up on social media as an alternate voice to influencers. In a nutshell, deinfluencing is resisting the urge to buy products that are promoted by influencers or brands.

Deinfluencers debunk those pricey must-have items, reminding social media users that they may not really need that makeup, hair product or closet organizer. Learning more about this trend can help you to better understand how social media shapes your idea of the status quo. You can follow deinfluencers and #deinfluencing — or simply unfollow profiles that set unattainable standards — to reframe how you think about what you have.

Alternatively, “not being on social media is the way for me to deinfluence,” Feldman says.

Swapping

When Feldman gave up shopping and dining out, she found new ways to spend time with friends.

“It forces creativity,” she says. “It’s very easy to get a drink or go to a restaurant with someone. It takes more imagination to say, ‘I want to spend time with you, but what can we do that doesn’t involve us spending a ton of money?’” Feldman and her friends in New York shared potlucks, went on walks and sought out other free and affordable things to do.

As she puts it: “Your friends are your friends no matter what. They don’t like you because you spend money with them, they like you because they’re your friends.”

You can practice swapping in your spending, too. Instead of dinner and drinks out with friends, swap for a game night or movie in. Instead of buying expensive new clothes, swap for a clothing subscription like Nuuly or embrace thrifting new-to-you clothes. Or, instead of traveling to luxury travel destinations, swap for visiting a friend or trying a staycation.

While a single swap may not make a big difference, many swaps over time can. Swapping can also help you practice spending money only when you really want or need to, not just out of habit.

Budgeting

Money tip: Using a budget to compare your income and expenses can help you decide which “wants” you can actually afford. By skipping that high-dollar purchase that’s not in your budget, you might realize you didn’t really want it, after all.

If you’re not already keeping a budget, it’s time to make one. A monthly budget can help you track expenses and set spending limits so you know where your money’s going.

Consider including at least some room in your budget for discretionary spending. Enjoying the pleasures you can afford may help you avoid spending on things you can’t afford.

“Budgeting is about a reprioritization of values, it’s not about deprivation,” Feldman says. For example, she chooses not to eat at restaurants often, but she does like to get her nails done once a month. “It becomes like a puzzle. What can I cut out so I can do the things I care about?”

It’s also important to set a debt repayment plan, if you have credit card debt. A balance transfer card buys you time to pay off a chunk of debt without accruing additional interest during the intro period. Just make sure you have a plan in place for when the APR kicks in.

And if you’re ready to start practicing healthy credit habits but don’t yet have a good credit score, check out these credit cards for bad credit.

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