Three Expensive Habits that are Putting Your Financial Future at Risk

by Vered DeLeeuw · 25 comments

We live in a consumerist society. Even after a long, painful recession, most of us still feel entitled to consume more than we can actually afford. Over the years, Americans have learned to expect a certain standard of living that previous generations could only dream of. We want more of everything, we want everything to be big and new and shiny, and we love to surround ourselves with every new gadget possible and with daily, expensive luxuries that really add up. Take a look at the following three habits. If you see yourself in that list, it’s probably time to cut back, save more and spend less.

A Sense of Entitlement

We have developed a strong sense of entitlement when it comes to our standard of living. There are certain things we have come to expect, such as a big house with a yard, an SUV as soon as we have more than one child, a big screen TV, and pretty much any new and shiny Apple gadget that goes on the market.

Looking at my own family, we’ve lived for several years in a 2-bedroom apartment, which we loved. It was bright, spacious, had a great downtown location and we loved having a pool and a maintenance guy at our constant service. But then our second child was born, and by today’s standards of living, a family of four cannot possibly manage in a 1200 SF, 2-bedroom apartment. So we moved to a big, 3000 SF, 2-story house with a large yard.

The house is beautiful and very spacious – we have more space here than we actually need – but it is also very expensive, both in terms of the monthly payment and in terms of maintenance.  We’ve been talking about downsizing, and although we will probably hold off with that until our youngest heads off to college in ten years, I do know several young families with children who are decidedly choosing smaller houses that are easier to maintain and easier to pay off.

Keeping Up

I’ll admit it: keeping up with the Joneses was part of my own family’s decision to move from our beloved 2- bedroom apartment to a big house. My older child started Kindergarten in a posh private school (we do have our reasons for sending our kids there), and I admit that I just couldn’t stand the horror in the other moms’ eyes when they realized we were living in a small apartment.

I wanted to keep up, to be like everyone else, and so we moved into a beautiful home and all was well. But of course it never stops there – there are luxury cars and annual vacations to exotic locations and expensive watches, designer clothes and various gadgets.

If you succumb to the “keeping up” mentality, it will likely not stop with a house, and could easily consume way more of your resources than it should. Those same resources that should go towards paying debt, building an emergency fund and saving for retirement.

Daily Habits

Your daily habits make a difference too. Many of us don’t even think about them anymore – we take that daily trip to Starbucks, eating lunch out with coworkers, and takeout dinners, for granted. But these do add up to hundreds, even thousands of dollars, per year.

This is actually one area where my family is doing well. Tired of mediocre, overpriced food and coffee, we brew our own freshly ground Illy coffee at home, and prepare most of our lunches and dinners. Eating at home instead of dining out is good not just for our budget but for our health – restaurant food is often too fatty and laden with sodium and with artificial additives.

Looking at your own life, how are you doing? Are you spending too much, trying to keep up and taking an expensive lifestyle for granted? Or are you trying to be conscious of your spending habits, ignoring the neighbors and consuming less?

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{ read the comments below or add one }

  • Bryin says:

    Why did you have the second child? Did you think you were entitled to? That is the biggest financial mistake you have made. It forced you to buy a house. Imagine if you had stopped at one child. The world does not need 2 child families. Have one child and call it a day.

  • Darrius R says:

    Excellent article. Early on in my career, I had a little red booklet in my pocket, everywhere I went. I used it to track my income and daily expenses. After 3 years, I learned that one of my largest expenses was from eating out. Of course, it was less than rent payments and government taxes, but it surely did make more than a dent in my budget. Small expenses add up over time.
    To Crystle T.: if you can embrace the advice in the article, you may someday find that you’ve swapped your cards out, albeit one by one, for a better hand. It may take years, but do keep working at it. “The harder I work, the luckier I get”.

  • Mark says:

    There’s an old engineering expression that goes “a problem well defined is a problem half solved”.

    It really seems like the root of all the author’s problems are this need to have the children in private school. The fact they don’t disclose the reasons for this shows that they are either shallow or simply don’t have confidence in the rationale behind their thinking process that got them there. Either way, that decision no doubt led them to upsize their home (obviously beyond their means) and then they realize that they need to keep up the rest of the facade as well, such as watches (really!?), vacations, clothes … etc. That stuff will put them even further beyond their means. Imagine the embarrassment when it all crashes?

    Their best bet is to relocate where there are great public schools and NO private schools (if saving face still means that much to them). Then they can reduce the rest of the living style to match, which would be within their means again. And for the record, private and expensive schools are over-rated especially at the elementary and high school level. Best to save the money for the kids’ college tuition as far as proven payback goes.

    And when doing all this readjustment seems to be a little too much, just read Chystle T’s comments because ultimately she is right. I feel the same way, but just trying to be more pragmatic about it all.

  • Crystle T says:

    The article is completely appalling!!!! Is this lady for real?? This person sounds like she has never been through anything tragic! Have you ever been through something life changing? Like a brain tumor? Does she even know how real life is??Does she even know lucky she has it in her 1st home that people scoffed at her b/c of the size of her place. REALLY?? Are you that insecure about yourself?? If anyone did that to my family they don’t deserve my presence. The way the economy is my husband and I are most likely going to have a child in a one bedroom appt. We both have great jobs but our condo we own dropped a lot in price and how is that our fault?? Its not but it is the cards we got dealt and we have to make the most of it. Our child will attend public school, and lady our child will be smarter and normal compared to your child going to a “posh private school.” Are you kidding me…. grow up and see how the world really is before the carpet is taken out from underneath you!!

  • alejandro read says:

    Not being American and old (82) can help but smile at the fallacies governing certain habits. Being Dominican, upper middle class, liberated from child support and mortgages, retired for 12 years, I look upon the Jones as poor creatures trapped in habits than can only hurt them. By living all my life within my means which included planning for retirement, we have lived /myself and my wife of 57 years) a full stress controlled life. In Spanish, my language, there is a saying, “you cover yourself up to where your blanket does” (free translation).

  • Matthew says:

    Great Article! I always love hearing about budgeting because its become such a big part of my life now. While I was in college I was a BIG spender and ended up graduating with over 15k of credit card debt and even more debt in student loans (2008 grad). You can bet that I learned quick how to budget my money and here I am three years later with a small townhouse that I bought and on track to pay off my car in 9 months by more than doubling the payments that I pay on it and no credit card debt! This week, I just signed up to get central air conditioning and when the guy asked what financing I wanted, I let him know I will be paying cash. What a great feeling! I do see my neighbor buying a new truck, motorcycle and remodeling his place, but I’m totally content without that stuff and knowing that I will soon be free from debt!

    Of course, I would not have been able to do all this if I had bought “new” furniture, or hadn’t brought my lunch with me to work every day. Everything adds up! Setting auto withdraws from my checking to savings accounts was probably the best thing I started doing.

  • Walter says:

    Don’t forget about the cost of smoking. Smoking cigarettes is an addiction that needs to be fed every day. It doesn’t take vacations or weekends off.

    Compaired with a person who smokes one pack a day, the nonsmoker saves about $2,555/year just for the cost of the cigarettes. Did you ever hear of compound interest? Well that means if you took that money every year and invested it instead of smoking it, after fifteen years with a concervative 6% interest rate, the value is an astounding $65,600.

    Of course, the cost of the cigarettes is only a small part of the total cost. Health costs are obvious, but reduced home values due to smoking are another.

    It is no secret that smokers earn considerably less than non-smokers. This may be due to other factors such as lower education than non-smokers which is another statistical reality, but statistics aside smokers have a more difficult time getting jobs, keeping jobs, and getting promoted. You don’t need statistics for that. Think of your own workplace. How many workers at your place of employment who you see outside taking cigarette breaks are in top management and how many of them are the lowest wage earners? It is no surprise that the fast food industry (ie the lowest wage earners) employs the highest ratio of smokers of any industry outside of the military.

    So in a nutshell, smokers probably have a greater opportunity to save money than most others simply by giving up one of the most expensive habits of all – smoking cigarettes. $65,600 cost of smoking over 15 years – assuming that the price of cigarettes does not increase over the next fifteen years! That is a lot of money.

  • imani says:

    Lot’s of great advice. Most people know all of these things, but putting them into practice is hard, because spending is a symptom of a much deeper problem. I notice that you said you moved from a two bedroom apartment into a very expensive home, with more space than you need. Knowing that, why wait ten years, until your youngest is grown, to move into more affordable living? You said you’re friends have downsized, why haven’t you? You talked about your kids going to a posh private school, for reasons, only you know and along with that came the need to move to fit in. I am sure your reasons for sending your kids to a private school, are like any other parent. Eating at home and making coffee, won’t impact your budget much. Most people have a coffee maker and most people make dinner and bring the leftovers for lunch…no big deal. Private schooling and large homes are the biggest investments. Sell your house and find a two bedroom apartment, in an area with good Public schools. Choose your friends and your children’s friends more wisely. Surround yourself with people who judge you.. for more than your assets. How superficial! Think about downsizing and save your money for a rainy day, or many rainy days. You can’t dole out advice that you don’t follow.

  • Michelle Coulter says:

    Such an interesting article. My weekday habit of having a $5 latte was costing me $30 a week, but I really, REALLY, feel like I need that kick start after being up for about an hour (seems like I can get by for about that long on sheer adrenaline). So, because I really REALLY needed to start not spending that money, but don’t like regular coffee, I invested in a Tassimo coffee system and went from spending $30 a week to $30 every 6 weeks for the pods. Granted that doesn’t factor in the cost of the milk that I added to it, but I’m buying milk every week anyway for cereal and hot cocoa. Anyway, my Tassimo paid for itself inside of a month and now I only go to my favorite coffee shop about once a week as a splurge.

  • Kashif says:

    I would like to share a tip that I have read recently and am planning to try soon. It says that one has to do an inventory check every few months (I think twice a year is a good idea) and trim out as much as possible. That way, one may weaken the sense of belonging / possession and may help out the less privileged too.

  • Dale Clark says:

    It is hard to relearn the difference between things we need and things we want.

  • Nicole says:

    Interesting posts. I’ve noticed I tend to fill whatever space and budget I have… in 1999 I took a 7-month long road trip around the USA in a 17 year-old Datsun I bought for $800. I had little money but camped cheaply, stayed in hostels or with friends/family and did work trade on farms. It was one of the most fulfilling – and freeing – times in my life. When I returned I was astonished by all the STUFF packed tightly in my rented storage space, and ended up giving away/selling/throwing out most of it – only to start anew each time I’ve moved.

    In many ways, not having much money is a blessing b/c I have to budget to make ends meet. “Keeping up with the Joneses” is a mentality of the upper-middle class (esp. urban/with kids) that I don’t envy.

  • Erin says:

    I’m a micro person. Though I never tried, I am pretty sure I would end up spending towards the limits that I set every month.

  • pascal Ntare says:

    We have to be more practical, to deal with poverty and clean our future through good thinking . The world is now very small because of the power of information technology ,we are lucky for that and we will be educated and professinals through this way.

  • pascal Ntare says:

    I will be hapy to know i be rich and poor persons to live in good conditions
    but particularly help my family and relatives.

  • Dan Klaus says:

    Good article. I pack my own lunch daily, only buy things on sale including groceries, love couponing, fill out the back of reciepts to recieve 15% off from JC Penny’s, and other things. Here is the best thing we do:

    I have a Schwab credit card which pays 2% cash back on all purchases. There is no annual fee and they reimburse for ATM fees even if you are overseas. The 2% is automatically deposited into our brokerage account monthly. So we use this card to pay everything. When that 2% arrives in our account, we transfer it to our educational savings account we set up for our daughter.

    So, the credit card company is contributing to our daughters education. I also invested the money in a Chinese stock which as grown as well. So between visa and China – my daughters account has grown quite well without costing us anything.

  • Squirrelers says:

    I think that keeping up with the Joneses is something that has been ingrained in our culture in the US, that most people seem to fall prey to at some point or another. Personally, I try very hard not to do that. Actually, I get some kind of joy out of just doing what I think makes most sense and is most logical – even if it makes me look less accomplished that my peer group. It all depends on how one defines “accomplished”, after all.

  • Cd Phi says:

    So true. We must keep those habits in check. It’s so easy to get carried away so it’s a good idea to always stop, stand back and take a look at what progress we’re making and whether or not we’re going in the right direction.

  • Lauren says:

    I love this post. It’s the little things that can add up to big debt or big lack of savings. I will say one thing though, it’s about how much value you place on that daily latte. If it’s just a habit, then yes, you should get rid of it. But if that’s your one vice and it gets you pumped for the day, then it might be worth more than $4. Sometimes it is the little things.

  • CreditShout says:

    There is definitely pressure from other people. I have a lot of friends that insist on going out every weekend, but I am much more content to make a frozen pizza and catch up on my DVR than going out to expensive clubs and bars. That way, when I do want something (like the new iPhone that is being released later this month) I can afford to splurge because I haven’t been spending money all month on the little things.

  • vered says:

    I thought I’d share two interesting comments that were posted on my Facebook wall in response to this post.

    Diane says, “We constantly need to remind ourselves that we love our little house – great location, great yard, good lighting – plus the freedom a small mortgage has given us to quit our corporate jobs and take some risks. But nobody sees that stuff, and they do see the lack of a guest suite, no dedicated toy room…”

    Betsy adds, “We’ve got a guest room that has never been slept in. Yet, as I’m looking for new places, I still think we “need” it, and I get nervous over less closet space. This is just plain stinkin’ thinkin’ and perpetuates needless tyranny from stuff.”

  • Jersey Mom says:

    You have made very good points. Changing my daily habit & lifestyle allow me to put money away for retirement and children’s college tuition. It’s very important for me to stick to my budget else I’d forfeit long-term financial goals.

  • MoneyNing says:

    I can definitely sense the entitlement Vered is referring to. The feeling is not only plain wrong, but it will also make us miserable too.

    Thinking about why you couldn’t excel is a loser’s mentality. Start spending your time figuring out how to do better and you won’t need to feel miserable ever again.

  • Miranda says:

    I think you really nailed it with the entitlement. We think we “deserve” all these things, and that they are “necessities” rather than luxuries. On top of that, few people want to put in the hard work and pay the dues, but still expect to have everything they want.

  • Stephan says:

    nice post, the keeping up with the jones’ mentalitty is obviously a huge part of why people started upgrading in the first place. I have been lucky in that none of my close family or friends really live extravegant lifestyles so i dont feel much pressure to move up, and i honestly dont care what society thinks of where i live or what i drive. in regards to the little things that add up, i totally agree with you and i have done really well in the past 6 months of basically cutting out all my coffee trips and fast food lunch breaks. i make my own coffee in the morning and bring a lunch to work, and ive definitely saved a few hundred $ each month already.

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