The Joneses Aren't The Problem!
If there's anything the Financial Independence movement hates more than spending $4 a day at Starbucks, it's the Jonses, and what we do to keep up with them. At this point, I've read a significant chunk of the FI blog posts out there, and it seems like every other post has a piece of advice about how you should never try to keep up with these stereotypical consumer who live near you. If you're not familiar with the idea of the "Joneses", they're your basic family who spends more than they make and focus that spending on showing off their own wealth. When we see our neighbors have something nice like a car or a boat or an exotic pet, we feel the urge to get the same thing.
There's even scientific evidence that shows that if our neighbors win a decent sized cash prize, between 2700 AED and 440,000 AED, people who lived close to them but didn't know about the prize, were almost 7% more likely to file for bankruptcy. The paper, from the Federal Reserve Bank of Philadelphia by Sumit Agarwal of Georgetown University, Vyacheslav Mikhed of the Philadelphia Fed, and Barry Scholnick of the University of Alberta, attributed this to people making riskier financial moves when they saw someone around them suddenly spending more money, in order to keep up with their neighbors' perceived level of financial success.
Here in Dubai and the UAE, we are surrounded by the signs of our neighbors' spending. I can't walk down my street without passing a Rolls Royce, a McLaren, and a Ferrari. My neighborhood is loaded with villas worth millions of dirhams. Even as frugal as I am, sometimes I can't stop myself from fantasizing about owning these bright, shiny things. And our Joneses here in the UAE have a major effect on our ability to save money. ServiceMarket and HSBC ran a survey to understand current saving habits in the country. Shockingly, almost a quarter (23%) of UAE working respondents admitted that they are not managing to save anything, while a further third (32%) are saving under 10% of their monthly salary. So that's 55% of foreign workers such as myself who are saving less than 10% here.
But I think there's hope. And this hope comes from the same social pressure that causes so many to overspend and overextend their finances. All we have to do is look at the Chinese to see how we can make the Joneses work for us.
According to the International Monetary Fund, the Chinese save a staggering 46% of their income, on average. Even for the poorest portion of Chinese citizens, their savings rate is near 20%. As an American, I find this staggering, because in the USA, the savings rate is closer to 4%.
Most researchers attribute the extraordinary Chinese savings rate to cultural factors. They came from great uncertainty in the last century and great hardship, and putting money aside allowed them to have some release of the stress of that turbulence. Saving became a big part of their culture, which meant that it became normal, and therefore socially reinforced. The Joneses in China aren't causing people to spend money they don't have to the point of bankruptcy, those Joneses are making their neighbors think twice before buying, and reinforcing the values that have allowed them to build up significant monetary safety nets.
This leads me to my main point: You just need to pick the right Joneses, ones with the same values as you, or values you aspire to have. Choose the right role models.
You can use that same social pressure to allow you to save money to buy a house or be ready for retirement. All you have to do is find a frugal tribe. There are a lot of options now that didn't exist even a decade ago that can help you. Personal Finance and Financial Independence blogs and Facebook groups like SimplyFI here in the UAE, ChooseFI, or the forums on Mr. Money Mustache are fantastic resources to surround yourself with people who will cheer on your frugal decisions, and castigate you for the times you need a bit of scolding to keep you on financial track. Heck, even I have a Facebook group that will help with this!
We know from research that having people hold you accountable makes people 65% more likely to achieve their goals and resolutions. The American Society of Training and Development (ASTD) did a study on accountability and found that you have a 65% of completing a goal if you commit to someone. If you make an accountability appointment with a partner, your rate of success goes up to 95%.
The key is knowing what you want, and then finding a supportive group of people who can help hold you to your goals. All those other people who don't have the same values will only be distractions. In the UAE, it can often seem like people who want us to spend all our money and then some are all around us. But if you look harder, you will find communities both in person and online that won't drag you down, that will inspire you to reach for and achieve your dreams.
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