If Your Neighbour Wins the Lottery You Are More Likely to Go Bankrupt
The perils of keeping up with the Joneses
Did you know that if your neighbour wins just $23,000 on the lottery, your chances of going bankrupt rise by 7 percent? What’s more, your chances rise by 2.4% for every $1000 increase in winnings.
That blew my mind.
I knew the broad stat already and it makes sense. Your neighbour wins, they buy a new car, maybe some nice clothes, they upgrade their house a bit. Your car, clothes, and house start to feel a bit shabby, so you upgrade too, except you don’t really have the money to do it.
The bit that made me sit up in my chair was how low that number was for such a significant increase in bankruptcy levels. Basically, it says that people are prepared to fuck themselves up financially in order to keep up with the Joneses, even if the Joneses have only won enough to fix up their bathroom.
The sad thing is, I very much believe the stats. I’ve seen it with my own eyes.
The curse of upwardly mobile suburbia
Until last year I lived in one of the more status driven parts of the UK. It was all flashy cars and those awful Ring doorbells and you couldn’t move for scaffolding down each and every road, as everyone tried to craft a better life through a better kitchen.
I heard people talk about how they’d visited their neighbours’ house and saw the incredible way they had decorated their hallway - “and it only cost £15,000!” - and decided to copy, taking out astronomical personal loans to do it.
It happens everywhere You see something fancier than your thing, you want that thing. It’s literally written in our DNA:
Subconsciously, humans look at those around them for confirmation of their social and economic status. In the modern world, those signals come in the form of houses, cars, clothes, jewelry and material possessions - mint.com
The worrying thing came when I spent time with friends who were on the conspicuous consumption hamster wheel and I asked them if they were happy.
Newsflash - of course they weren’t.
They were working all the hours of the day in a job they hated but couldn’t leave because they were living paycheck to paycheck, only just making their extortionate mortgage payments.
I knew 3 person families who postponed vacations for years because of the 2 bed exension on their 5 bed house.
They never saw their kids because they were too busy working during the week and trying to catch up on house renovations and decorations at the weekend.
Man, it sucked for them.
Flipping the psychological script
We’re all told that status is important, it’s the script we’ve all memorised since we were kids. The problem is, it’s bullshit. And it’s proven to be bullshit.
A study by psychology professor Tim Kasser from Knox University unequivocally shows that mental wellbeing takes a nose dive the more materialistic we become.
But it’s a chicken and egg scenario. The more insecure we feel (economically, socially, or any other way), the more likely we are to spend money. As Tim says, when a part of life gets turbulent, possessions look like a pretty sturdy thing to hang onto until the storm passes.
We feel insecure so we spend more - and indeed are more likely to keep up with the Joneses - which adds to our mental distress, making us feel insecure, so we spend more…and on and on it goes.
It’s time to flip the script.
Money = freedom is the best concept you’ll hear today
The day I realised just how intrinsically linked money and freedom are is the day I understood how wrong my financial approach had been.
I shouldn’t have been using my money to buy bigger and better material possessions, I should have been using it to buy my freedom. Because that shit lasts and it nourishes. The 60 inch TV does not.
Freedom means different things to different people but at its heart, it means having the ability to focus on meaningful experiences and interactions and stuff that makes your tummy feel funny (in a good way).
During the summer, I spent an afternoon on the beach with my family including my one-year-old niece I’d only met once before (thanks, Covid). It was a random Wednesday afternoon. I finished my work early and headed towards the waves. As I sat watching my niece smoosh blue ice cream into her face, I got that funny tummy feeling. Here I am, on a Wednesday of all days, hanging out at the beach with my family, people who really mean something to me. THIS is why I became a freelancer. It was the freedom to do this.
The feeling was so strong, I wrote 1000 words on it.
THAT is the sort of freedom I’m talking about. And that’s what money can buy you, once you stop trying to one-up your neighbours (or indeed, yourself).
No bankruptcy required.
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