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Hello again, everyone.
This is part 3 of a four-part article entitled The Four Golden Rules of Personal Finance.
The beginning of the article and Rule #1 can be found here: http://community.adlandpro.com/forumShowPost.aspx?PostID=307274
If you didn't see the second thread because I didn't use the notify feature, find it here: http://community.adlandpro.com/forumShowPost.aspx?PostID=309289
Update: Rule #4 is now available here:
http://community.adlandpro.com/forumShowPost.aspx?PostID=318883
Rule # 3 surprised me a little, but makes perfect sense. We've been told that 'keeping up with the Joneses' is a sure way to financial ruin, but have you ever thought about the other side of the coin? Here's what the author, Francis Kier has to say about it:
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Rule #3: Pay attention to the finances of the people with whom you spend the most time. Whether they are relatives, friends, or co-workers, these people have the most impact on your financial life. Do they consistently follow the first two rules of the money game? Do they earn about the same money as you?
If the answer to either of those is "no", then I recommend that you start spending a little less time with them; and this is why. If they don't consistently follow the first two rules, it is unlikely that you will either. You unconsciously model the people around you, and the more people you are exposed to that don't follow the first two rules, the more likely that you will unwittingly follow them. No one thinks they are 'trying to keep up with the Joneses', but we all do it to some extent, and this is the mechanism.
On the other hand, if they earn a lot more money than you, you may rack up a lot of debt trying to keep up with them (meeting them at their favorite expensive restaurant, joining them for another expensive vacation, buying a new car because yours is the junker among all of your friends, etc.)
On the other hand [sic], if most of your friends earn a lot less than you, you will turn into the group's banker. For example, you'll find yourself in the pattern of putting your credit card down to pay for dinner and they'll all say they'll pay you back later, but 50% of them never do; and they don't mind taking advantage of you because, after all, you earn a lot more than they do. Or, you and your friends need to pay a deposit for renting a house and they expect you to write the checks because you have the money available and they do not.
The neighborhood that you live in also creates financial pressure to violate the first two financial goals. Your neighbors are likely to become friends (and I've already gone over this), but they also influence the size of your home, extent of your landscaping, price of furniture, and the size of your TV. So pay very close attention to the finances of your neighbors - if you don't like how they are measuring up for first two rules, move somewhere more in alignment with your financial goals.
If your family and friends, don't measure up financially, find some additional people to spend time with that have financial habits that you'd like to emulate and learn from. I have friends with a wide range of income, but it is much more difficult to follow the first two money rules when I am with the extremes from my own income. You'll just find it easier to reach the next rule when the peer group that you hang out with aligns closer to your economic level.
To be continued...
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Did that surprise you? It did me! I wouldn't have expected this discussion as one of only four golden rules. Still, I'm going to be evaluating my friendships in this light and determine who can undermine my goals. I'll still be friends with them, but I'll definitely be on guard against being pulled off course.
Can't wait to share the final rule! See you soon.
Cheri
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