Neighborhood_623

The Pull of the Neighborhood — Four Ways to Keep Your Financial Footing

Think about your neighborhood for a minute, and some of your immediate neighbors. How similar is your lifestyle to theirs? How similar is the car you drive or the types of vacations you take?

Juliet Schor, author of several books that have been very influential to me, such as The Overworked American, The Overspent American, and Born to Buy, says neighborhoods tend to be so homogeneous that marketers can reliably predict “how many credit cards you have, which appliances fill your kitchen, where you buy your clothes, and the magazines you read” solely based on where you live.

A certain amount of financial similarity with our neighbors makes sense. Neighborhoods tend to attract people of similar incomes. It’s perfectly fine if the similar lifestyle you’re living is one you can afford. But it’s worth stopping to consider whether our neighbors are having an unhealthy impact on our spending.

Humble beginnings

I mentioned last week that our 13-year-old son and I spent a fun weekend in Chicago recently. During our visit, I showed him the northwest side neighborhood where my wife and I spent the first five years of our marriage and where he spent the first year and half of his life. It was pretty surprising to him.

It’s a densely populated, very ethnically diverse, working class area. Big multi-unit brick buildings line the streets where cars are parked on both sides. We owned a condo in an old six-flat that had been gut rehabbed.

I don’t miss the crime or the congestion of our old neighborhood, but I do miss the complete lack of pretense. There’s no Starbucks on the corner, and the people who live there don’t drive fancy cars or wear the latest fashions. We never felt any pressure to keep up.

Today, life is very different. In our current neighborhood, we know people who take a Disney vacation every year. Fortunately, most of our immediate neighbors keep things pretty real, but we don’t have to wander too many streets over before we see various displays of conspicuous consumption.

And let’s face it, our entire American culture is a consumer culture. Whether in our neighborhood, at our workplace, or on TV, we regularly see people who are living a life that’s materially bigger than ours, and if we’re not careful, it can have an impact on our finances and our happiness. Here’s Juliet Schor again:

“It may be as simple as the fact that exposure to their latest ‘lifestyle upgrade’ plants the seed in our own mind that we must have it, too—whether it be a European vacation, this year’s fashion statement, or piano lessons for the children.”

Keeping it real

If you’re in the market for new house, keep the potential pull of the neighborhood in mind—the ways it may influence your lifestyle. If you already live in a high-consumption neighborhood, here are four suggestions.

1 – Determine to live your life, not your neighbors’ lives

It helps a lot of you have a budget—or, as I prefer, a cash flow plan—that guides how much you allocate to each spending category, such as entertainment and vacations, based on your income and household size.

2 – Declare your neighbors the victors

I’ve always loved an illustration used by my friend and mentor, Dick Towner. If I remember it correctly, he suggested walking to the end of your driveway late one night, looking around at your neighbors’ houses, and yelling at the top of your lungs, “You win! You get the prize for the nicest cars, the best-kept lawn, and the most incredible vacations! As of today, I’m out of the competition!” Then you may need to jog back inside before the police arrive.

3 – Practice gratitude

Regularly giving thanks for what you have does wonders for keeping your focus off of what you don’t have.

4 – Move

Sure, this idea is pretty radical. However, before you dismiss it, read the powerful story of one couple that realized fairly quickly after moving into what they thought would be their forever home that they had made a big mistake.

In what ways do you see your neighborhood impacting your spending, whether positively or negatively? And if you have some high-consumption neighbors, how do you keep your financial feet on the ground?

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2 Responses to The Pull of the Neighborhood — Four Ways to Keep Your Financial Footing

  1. Steveark July 18, 2017 at 3:35 PM #

    I never thought about it but the fact we live in a modest neighborhood probably is one reason my wife and I were able to retire early with more money than we need. Nobody has a Mercedes or similar luxo car in the entire hood. Wouldn’t surprise me if half of my neighbors are millionaires next door like us.

    • Matt Bell July 18, 2017 at 4:38 PM #

      That wouldn’t surprise me, either. There is something very healthy — financially and otherwise — about living in the midst of people who live well within their means.

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