The Cost of Keeping Up With the Jones
November was Financial Literacy month here in Canada. While this is a good way to focus attention on personal finances, successful money management is a full-time, year-round job.
There is an old country music song by Waylon Jennings from 1977 that is still relevant some 39 years later. One of the verses of the song goes “…we’ve been so busy keepin’ up with the Jones, four car garage and we’re still building on, maybe it’s time we got back to the basics of love.”
That line captures the social pressure put on us by friends, family and to some degree ourselves, to “keep up with the Jones” which can distract us from our goals and lead to financial hardship. Let’s be honest, who doesn’t want a bigger house, a new vehicle, or the latest electronic gadget? There is nothing wrong with any of these things if we can afford them. However, we have to take a step back and ask ourselves a few questions. First, what are these material things going to add to my overall quality of life. The second, and likely more important question, is how are we going to pay for these purchases and what is the overall cost? As always it comes down to the age old battle of wants versus needs.
As Trustees, we often see families putting themselves in difficult financial situations because they make purchase decisions based on emotions rather than considering the total cost. One of the most glaring examples is the increasing number of families purchasing camper trailers. I’m not referring to the good old popup tent trailer. No, I’m referring to the 30-40 foot houses on wheels that come fully equipped with all the conveniences of a modern home.
Here’s a real life example taken from one of our clients (the details have been changed to protect their identity) who financed the purchase of a brand new travel trailer in 2011.
Purchase Price $17,580.87
Taxes (15%) $2,637.13
Down Payment $0
Total Purchase Price $20,218
Interest Rate 7.99%
Monthly Payments $168.99
Term 240 months = 20 years
Total Paid After 20 years $40,557.60
Assuming they still have the travel trailer by the year 2031, they will have made payments for 20 years and will have paid $20,2339.60 of interest. At this point the item might be worth a few thousand dollars at most. For the sake of a few weekends each summer wouldn't it make more sense to rent a trailer or cottage? That way you get the enjoyment that comes with the camping experience without all of the expense. That way if you have some sort of financial crisis, like a job loss or critical illness, you won't have to worry about how you're going to make that next travel trailer payment.
This article has nothing to do with travel trailers or any other big ticket items. It's simply to make consumers more aware of the financial decisions they are making and decide whether or not a purchase justifies the cost. It’s all about setting financial goals and priorities, living within your budget and not getting distracted by trying to “keep up with the Jones”.
Powell Associates Ltd. is a Licensed Insolvency Trustee (LIT) focused on providing debt settlement, proposal and bankruptcy solutions for individuals and businesses. We offer free consultations to review your personal financial situation and practical debt resolution options. Contact us to discuss your situation over the phone or book an appointment to meet us face-to-face in Saint John, Moncton, Fredericton, Charlottetown or Dartmouth - it's your choice.