Keeping up with the Joneses sends 4 million into debt

Millions of Australians are overspending to keep up with friends and family, according to new research by Finder.

A survey of 1,000 respondents found one in two of us have felt pressured to spend money. One in five (22%), the equivalent of 4.3 million people, have spent more than they could afford, or worse, gone into debt by bowing to pressure to spend.

The impact of peer pressure can be broad. One in seven survey respondents say they’ve been coerced into going on an expensive holiday with family members. Close to one in ten Australians admit to buying expensive items like a nice car (8%), home (8%) or designer items (8%) to keep up with the Joneses.

Spending more just to keep up with your social circle is an easy way to blow your budget. And it can lead to a situation called lifestyle creep. That’s when we start to see spending on non-essential luxury items as necessities rather than non-essentials.

It’s human nature for us to want to be accepted, liked and respected by others. So how do you break the spending cycle if you’re feeling the pinch of peer pressure?

The first step is to realise that the Joneses may not be living such a perfect life. Canstar’s 2021 Consumer Pulse Report shows one in three Australians are carrying debt outside of a mortgage, with the average amount owing being $46,020 per person. That’s up 52% from 2020.

The bottom line is that your neighbour, friend or relative who has an impressive home, new car and takes regular holidays could be deep in hock.

That brings us to step two – resist the urge to compare what you have to others. Set your own financial goals. This can be the deal breaker on unplanned spending. Sure it can be tempting to upgrade your car to match the neighbour’s. But if one of your key aspirations is to, say, retire early, you need to understand that matching your car to the one in the drive next door could set your own goals back several years.

At the end of the day, it's your money and you get to decide how you spend it. If your friends are good friends, they'll want to see and spend time with you – and what you have, and how you spend, shouldn't really matter.

Paul Clitheroe is Chairman of InvestSMART, Chair of the Ecstra Foundation and chief commentator for Money Magazine.