You look out the window of your home each night after dinner, staring across the street at your neighbors. You long for their fancy cars, their manicured lawns, and even the vacations they seem to take several times a year.
You’re not alone.
I often look out my window, too — staring at the gorgeous homes and cars — wondering how they manage to pay for them. After all, we live in the same neighborhood, our kids go to the same schools, and their salaries aren’t that much more than ours.
There are several reasons that our neighbors can afford so many of the things we would love to have, but could never fathom splurging on:
•Perception is everything
Your perception may be skewed. You see fancy cars in the driveway, and you can almost feel the trim lawns under your toes. You watch work crews constantly going in and out as they work on awesome remodeling projects inside. Yet, none of this means that your neighbors are wealthier than you are.
Just because YOU see them as more affluent doesn’t mean they ARE.
You’re only able to see the surface of their spending; you have no idea what’s happening underneath.
•Allocation is essential
While you choose to consistently save money for your kids’ education, and for your retirement, they could be spending these “excess funds” on their cars and homes. They might be making the shallow choice to spend their money on what people can see, while you’re spending your money on the life you want to live, both today and tomorrow. You’ve chosen to pay for peace of mind.
It’s how your neighbors allocate their income that makes them seem richer than they are.
While your neighbors’ salaries might be slightly higher than yours, it likely isn’t enough to justify their massive leap in spending. Fringe benefits, however, can greatly widen the gap. They could be receiving perks like cars, phones, or laptops; these can give the recipient an amazing leg up when it comes to freeing money for other pleasures.
•Luxuries of the mature
As families mature, houses get paid off and savings grow. Even if your children attend the same school, their children are older, and the adults have a few years on you, as well. They very well could have spent those few extra years making payments on their house and putting money in the bank — giving them a huge advantage. Just imagine how much more financial freedom you would have if you didn’t have to manage your monthly mortgage.
•Their lives might be plastic
Your neighbors might worship the power of the plastic. While you’re smart enough to understand the headaches of undisciplined credit, your neighbors might be living carelessly — buying short-term luxury today in exchange for a meager tomorrow.
•They know where to find deals
I consider myself a connoisseur when it comes to finding great deals on groceries and kids clothing. Perhaps your neighbors also know something about finding deals on the things they need, which frees up more money for things they want.
• They pay for their immediate wants first
Your neighbors could also have more money than you do because they prioritize differently, and pay for projects and luxuries from their savings.
While my neighbors may or may not make more money than me, I don’t let it influence the way that I live.
I spend money in the way that’s most important for my family and me — both for a better, more comfortable today, and for a brighter tomorrow. As “The Millionaire Next Door” and “Rich Dad, Poor Dad” point out, those that use their money for homes, cars, and clothes are spending on material items and living on “rented” lifestyles. Instead of building assets, these people are living on liabilities, and that can be a dangerous mindset.
You don’t have to live like a king today if it means you’re going to live like a pauper tomorrow.
It doesn’t matter what the Jones’ are doing. Not now, or ever. Save where you can, spend where you need, and live a life you want.