Written by Kelley Keehn
Friday, June 19th, 2020
It used to be that if you were poor, you looked poor. If you were rich, everyone knew you were rich. But with the creation of credit, and with today's cheap credit, it's easy and enticing to live like a big shot while only paying the interest on rising debt.
Keeping up with the Joneses (or FOMO) is a real thing. One report found that for every $1,000 your neighbour wins in a lottery, your likelihood of going bankrupt increases by 2.4%. Good thing your neighbour isn't likely to receive a windfall like that anytime soon, but it illustrates the phenomenon isn't just an urban myth.
The Dangers of Keeping Up and Accruing Debt
The trend to keep up is dangerous and too many Canadians are using their homes as ATMs. Those using a Home Equity Line of Credit – or a HELOC as many know it – skyrocketed in recent years. And with household debt numbers on the rise in Canada, that means that at the end of two, three or more years, these debts aren't getting paid off.
But why do we fall prey to trying to keep up with others, even if we know it may be funded by debt?
Canadians are more susceptible because not only do they believe they can afford it and deserve it, but they also feel like they need to have it to maintain their "level" in society.
Tips to Help Arm Yourself Against Unreasonable Financial Comparisons
- Remember, most people are purely concerned about themselves. They only look at others for comparison purposes—they just want to know where they themselves end up on the scale. They don't really care about you, per se. Who are you really trying to impress in the end, if no one's really watching you?
- Focus on yourself. You don't know where people's money is really coming from. It could be from debt, but also parents or other relatives.
- Happiness is a state of mind, and when you make it something external—like the latest gadget, a new partner, a new job, trend, car—you're no longer the master of your own happiness. No one should base their happiness on external things, because we can't control our environments 100%.