You look out the window of your home each night after dinner, staring across the street at your neighbors. You long for their fancy cars, their 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 that 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 you can almost feel the trim lawns under your toes. You watch work crews constantly going in and out as they work on awesome remodeling projects inside. Yet, none of this means that your neighbors are wealthier than you are.
Just because YOU see them as more affluent doesn’t mean they ARE.
You’re only able to see the surface of their spending; you have no idea what’s happening underneath.
2. Allocation Is Essential
While you choose to consistently save money for your kids’ education, and for your retirement, they could be spending these “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’re spending your money on the life you want to live, both today and tomorrow. You’ve chosen 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 higher than yours, it likely isn’t enough to justify their massive leap in spending. Fringe benefits, however, can greatly widen the gap. They could be receiving perks like cars, phones, or laptops; these 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 attend the same school, their children are older, and the adults have a few years on you, as well. They very well could have spent those few extra years making payments on their house and putting money in the bank — giving them a huge advantage. Just imagine how much more financial freedom you would have if you didn’t have to manage your monthly mortgage.
5. Their Lives Might Be Plastic
Your neighbors might worship the power of the plastic. While you’re 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, which frees up more money for things they want.
7. They Pay for Their Immediate Wants First
Your neighbors could also have more money than you do because they prioritize differently, and pay for projects and luxuries from their savings.
While my neighbors may or may not make more money than me, I don’t let it influence the way that I live.
I spend money in the way that’s most important for my family and me — 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 use their money for 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 have to live like a king today if it means you’re going to live like a pauper tomorrow.
It doesn’t matter what the Jones’ are doing. Not now, or ever. Save where you can, spend when you need to, and live a life you want.
In The Meantime, Here’s How to Feel Richer
Think about wealth for a second. Is it really just about money? Or are there other factors involved?
What Makes Me Feel Rich
Even though I’m not what many people would consider “rich” in terms of income, I do feel rich in a number of ways. Some of the things that help me feel rich include:
I have a flexible job: It’s amazing the feeling you get from having a flexible job. Whether you have flexible hours at a job outside the home, or whether you have your own business and can choose some aspects of your job, there is a certain richness in being able to choose your hours, how long you work, and who you work for.
Being able to indulge in small treats: One of the things I like is being able to indulge in small treats. A matinee at the movies, a new book, or dinner out is a treat that I like to indulge in. As long as I have the resources to indulge occasionally, without worrying that it will ruin my finances, I feel rich.
Helping others: Many of us can feel rich when we help others. Whether we give our time to help someone who needs our aid, or whether we write a check to a charity, or donate canned goods to the food bank, or give blood, doing good can be a real boost. It reminds us of how much we have, and what we have to give.
Time to do what I want: Lately, things have been so crazy that I haven’t had time to practice music, or engage in activities with my family. I’ve made a little extra money, but I somehow feel poorer. We all like to have time to do something we enjoy, and when I’m so hurried I don’t have time to read a book at lunch, or make cookies with my son, I feel the lack. So, freeing up more time is a definite priority for me.
In so many cases, “rich” is a state of mind. It depends on how you view your life, and what you can do. While it’s true that, to a certain extent, money is necessary in order to live, and while money can make living more pleasant, money isn’t the only thing that makes one “rich.” Many people cite family, friends, health, hobbies and other items as things that make them feel rich. Focusing only on a dollar amount doesn’t always lead to satisfaction with your finances. Managing my finances so that my needs are taken care of, and some of my wants can be enjoyed, is my definition of “rich.”
What’s your definition of “rich”?