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It’s one thing keeping up with the Joneses but a poll from Edward Jones finds that 61% of Canadians wonder how their friends or neighbours can even afford their lifestyles. This is especially so among Millennials (aged 18 to 34), 71% of whom felt this way, while 66% of Gen Xers aged 35 to 44 were curious to understand how those around them finance their purchases.
Seems to me this gives new meaning to the phrase The Millionaire Next Door, a popular book on how frugality is a key trait in building wealth. Typically, the kind of millionaires in the book live modestly and their net worth may not be obvious merely observing the size of a given home and/or what’s parked in the driveway. Conversely, it can also be that an apparent “millionaire next door” has no net worth at all but is fuelling their conspicuous consumption merely with debt.
Either way, it appears many of us are influenced by what our associates are spending their money on.
Sadly, the Edward Jones poll found that the pernicious practice of looking at the purchases of others may influence consumers to buy beyond their own budgets: a whopping 93% said they experienced buyer’s remorse after such purchases and admit to regrettable spending habits. Among Millennials, 96% experienced buyer’s remorse but so did 90% of baby boomers.
Among the types of purchases most likely to generate regret were tangible purchases, which were cited as a source of regret in 83% of cases. Clothing or shoes were regretted by 35% polled, jewelry by 28% and electronics by 26%. Millennials regretted spending on clothing/shoes in 47% of cases, while boomers were more likely to regret spending on jewelry (34% of them did).
While Millennials famously are supposed to value experiences over stuff, across the Canadian population, 83% regretted making impulse tangible purchases, versus 71% for experiential purchases.
Build spontaneous spending into your budget
So what lessons does this survey furnish for those seeking ultimate financial independence? “If you know you enjoy spending money spontaneously, build this into your monthly budget,” said Roger Ramchatesingh, Director, Solutions Consulting at Edward Jones in a press release issued on Monday, “When it is unplanned for, it can add up over time and hurt other long-term goals such as retirement or the purchase of a home.”
The poll also found only 44% of respondents have a strategy in place and adhere to it. Among Millennials aged 18 to 34, 75% believe they should have their finances in order, but only 38% of that cohort have a financial strategy and follow it. And only 44% of those aged 35-44 have a strategy in place, despite 46% believing finances should be in order by then.
Ramchatesingh says financial advisors can help in developing such strategies and build confidence in managing money: “It’s clear that when people have a financial strategy in place and work with someone they trust, they feel more comfortable with their finances.”
The survey of 1,565 Canadians was completed online between May 23 to 26, using Leger’s online panel, LegerWeb.
Manulife Bank poll: Spouses and their financial secrets
Meanwhile, in another poll this week, Manulife Bank found a rising trend to spouses or common-law partners to keep debts and recent large purchases a secret from their significant other. You can find my blog on this in the Financial Post by clicking on the highlighted headline: ‘No, these golf clubs aren’t new …’ and other costly surprises your partner is hiding from you.
