“One pretends to be rich, yet has nothing; another pretends to be poor, yet has great wealth.” – Prov 13:7
You know the family. They have a big house, drive the latest model car, belong to the local country club and otherwise seem to have it all. But do they really? If you were to be able to see into this family’s financial reality, it might not be as wonderful as you think (see the comical commercial illustrating the life of Stanley Johnson here). There is nothing wrong with houses, cars or country clubs. However there is something wrong with a family stretching their budget to the breaking point to have these things to appear “successful.”
This fallacy was artfully exposed in “The Millionaire Next Door.” One of the aims of the book was to destroy the notion that wealth could be assessed purely based on outward appearances. The book references an old saying in Texas for people who put on the false appearance of wealth – “Big hat, no cattle.” The book also proposes that many truly wealthy people actually appear to be very average and ordinary. The authors suggest that you might have a millionaire living next door, and you don’t even know it.
Many people are often captivated by the perception of wealth more than the reality. One may be tempted to “pretend to be rich” as the Proverb above indicates. This pretending is manifested in a host of ways. I’ll list a few “symptoms” of this malaise:
1. Buying more house than is justified by our income. Stretching ourselves to the breaking point on home ownership is not wise. When a house payment with taxes and insurance exceeds 25% of gross income, all it takes is the slightest speed bump to throw finances off course. High salary families would actually be wise not to exceed 20% of the gross. Think about it this – the less a house payment is, the faster we can pay off our mortgage and the more room we have to give and to save. If 25% of gross income is going to a house payment, this might represent 30-35% of our take home pay. That is a large chunk of income, especially if we have other debts. A good housing percentage depends greatly on a number of factors, but not exceeding 25% of gross salary is a starting point to monitor.
2. Caring too much about brand names. This is not to say that there are not some brands that offer distinctly higher quality than other brands. Sometimes it is true that “you get what you pay for.” However, we need to examine our hearts to determine why we want a particular brand. Is it because the quality of the brand will make for a better overall investment or is it because we want others to take notice of the brand we bought? Do we want people to see the logos on our clothes or the make of our cars so they will admire us? We all seek affirmation in one form or another, so it is easy to look for admiration by insisting on brands that are recognized as expensive or exclusive. It may be that there are brands of comparable quality that can reduce our spending dramatically. Not being willing to “let go” of a particular brand may be a symptom of “pretending.”
3. Not giving to help others. We are a prosperous society. Those making minimum wage in this country are better off than 93% of the world’s population (see the Pew Research here). The Lord blesses us in order that we might be a blessing to others. If we find room in finances for expensive things but not for giving to others (including our local church), we have our priorities out of line. We are elevating temporal things and perhaps even a pretension of wealth above investing in things that will outlive us.
Why should you care about avoiding “pretension.” Because pretending to have more than you can afford will eventually end in disaster. Stretching your financial resources to their limits causes enormous emotional stress. If untreated, living on the edge of your means can push you off the financial cliff into bankrupcty. This has the potential to damage your ability to access credit and the rates for which you qualify for years to come. Identifying these symptoms is critical for your financial health.
If you find that one or more of these symptoms describes you, what can you do about it? Don’t let another person’s glamorous lifestyle make you envious, particular because it may just be a facade. Focus on your own resources that you have been given. Enjoy those resources, preserve some of them for the unexpected, and be generous whenever you have opportunity to do so. Get guidance and advice on how to manage your resources well (we can help with that, by the way). Don’t worry about keeping up with the Joneses, or with Stanley Johnson, because they just might be in “debt up to their eyeballs.”