What the Joneses Are Doing

. July 21, 2011
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There are thee steps to self-funding your dream: (1) saving money, (2) investing wisely, and (3) time. Some of us don't think we can get past the first step because as our income goes up, so does our spending. We have to keep up with the Joneses. But what are the Joneses doing?

Chances are, the Joneses are paying for their new cars, cable TV, 4G phones, new furniture, and utility bills with debt. The average American household has $18,600 in consumer debt, a third of which is credit card debt. This number doesn't include home mortgages or home equity lines of credit.

Mrs. and Mrs. Jones may even have borrowed against their home to buy yet more goodies, since loans against homes aren't counted as consumer debt and don't always affect credit scores.

Even before the 2008 financial crisis, one in five Americans said they planned to borrow to pay their winter heating bills.

What could you buy with $18,600? Would this close the gap between you and your neighbors? The problem with comparing yourself to them is that they didn't have that money, either. They're still making payments on what they bought.

Crucifying the Dream

Let's look at what the Joneses are giving up by borrowing this money.

If they're paying 16% interest on their consumer debt and inflation is at 4%, their inflation-adjusted rate is 12%. Let's make the charitable, but unlikely, assumption that interest rates will stay at these low levels in the future. Let's also assume that they roll over this debt to new credit cards and aren't concerned with paying it off.

How long will it take before their debt expands to $200,000 after adjusting for inflation?

The handy-dandy calculator says 20 years.

Recall that $200,000, throwing off $14,000 a year in passive income, is the amount of money a family needs to live overseas indefinitely. It would put two children through Christian school at $7,000 annual tuition per child.

By borrowing to finance their lifestyle, the Joneses have sold their future. In twenty years, they will owe an inflation-adjusted $200,000, an amount that could have bought them their life's dream.

We hope the toys were worth it.

Debt Is Slavery

You may be frustrated because you can't afford cable TV and an iPad. But chances are, the Joneses can't either. Borrowing gives us the appearance that they can.

Don't let new furniture and a shiny car steal your dream from you. You have a passion to serve God. Steward His money well.

The world will be a better place for your service, not just for you, but maybe for the Joneses, too.


1 A good name is to be more desired than great wealth,
Favor is better than silver and gold.
2 The rich and the poor have a common bond,
The LORD is the maker of them all.
3 The prudent sees the evil and hides himself,
But the naive go on, and are punished for it.
4 The reward of humility and the fear of the LORD
Are riches, honor and life.
5 Thorns and snares are in the way of the perverse;
He who guards himself will be far from them.
6 Train up a child in the way he should go,
Even when he is old he will not depart from it.
7 The rich rules over the poor,
And the borrower becomes the lender’s slave.     Proverbs 22:1-7

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