Dysfunctional Financial Personality #1: The Peacock
10 August 2006This post is the beginning of a series on various personality types that people tend to have that result in them getting into financial trouble. A lot of personal finance advice is kind of generic, and it often doesn’t really get at the specific reason that is causing YOU to have financial problems. There are lots of potential reasons you could be in trouble - and what changes you need to make to your life depend on what the cause of the problems is. So here’s the first problem personality type: the Peacock.
One of the most important principles of personal finance for anyone to learn is this: it’s easiest to save money when you don’t spend it.
Most people who are new to saving money have lived for a long time by consuming at or above the level they earn. This means that you spend everything you earn (or more, if you have credit cards), and then you start coming to sites like this either when you find yourself drowning in credit card debts or when you are approaching retirement and realize that you need to do something to start saving. In other words, most people who are trying to learn about personal finance are people whose lifestyle choices haven’t done very well for them - they’ve spent themselves into a corner, and in the end realize that it isn’t sustainable.
Now, if you’re one of these people, there are a lot of different reasons you could have been spending. It’s going to be up to you to figure out why your finances aren’t in shape and what was behind your own problems. This post will focus on just one of these reasons: being a peacock.
There’s a tendency among many people to think that being wealthy is a game of perceptions. If you don’t show it, you don’t have it. A peacock is a person who buys into this idea and decides that it is extremely important that everyone around them know that they’ve got lots of money. Like a peacock, they alert everyone else using an ostentatious display. You’re a peacock if you buy rolexes, $1,000 suits, new cars every year, vacation homes in areas where all your friends summer, or any other things that are designed solely to make other people think you’ve got money.
Often, people who fall into this category actually earn fairly high incomes. The problem is that they just don’t save any of it. In fact, it’s usually the high income itself that leads to that behavior - most of their friends will live in fancy areas, and they’ll feel the pressure to keep up with them. They may be a professional who worries about their appearance and what clients will think about them. They may buy into the “you have to show money to make money” philosophy that has burned so many in the long run. They may just be bad with money - doctors seem to face this problem especially. But peacocks end up flashing money around on the theory that it’s the only way anyone else can see it. They often don’t save much if anything at all from their income. The excessive spending catches up to them in their fifties, as they start looking to retire and realize they haven’t done anything at all in terms of saving. They’re staring at retirement in a few years with no real way to catch up.
So what do you do about it if you think you’re a financial peacock? Here are some things you can do to change your ways:
1) Realize that you don’t have to spend money to make people think you’ve got lots of money. Since peacocks mostly care about the impression they give off to others, they shouldn’t be worrying so much about whether they actually spent tons of money or not. There’s a good article along this lines called “9 Ways to Look Rich But Live Cheap” on MSN Money here. I’m not sure the advice there goes far enough - I think a lot of people would tend to just spend all their money anyway. But if you can’t stop yourself from trying to posture to other people, at least take the advice that:
Given how many discount stores and Web sites there are, it’s ridiculous to pay full price for anything. You can dress like Vogue editor Anna Wintour for a fraction of what she pays, just by shopping at Target, which features super-cheap but trendy duds by high fashion designer Isaac Mizrahi.Other ways to enrich your wardrobe: shop at consignment (aka “secondhand”) stores, but only in tony areas. Christine Sparta, a free-lance writer in New Jersey, bought a Christian Dior suit at just such a place for $58. No, I didn’t forget a zero.Learn to work the Web. “If I see a pair of designer shoes at Bloomingdales,” says deNicolais, “I know I can find the same exact pair for $50 or $60 less at SHOEbuy.com.” I like to go straight to the “clearance” section of my favorite retailers online — from L.L. Bean to Victoria’s Secret to Crate & Barrel. I’ve gotten amazing deals.
2) Go read the book The Millionaire Next Door. This book is written for you. Particularly telling are the contrasts between two real-life doctors who both make around $700,000 a year. One doctor has a net worth of $8 million or so - while the other has a net worth of only $400,000, less than his salary! Despite making a ridiculous amount of money, the second doctor will have an incredibly difficult time retiring. The basic difference between the two was that the second doctor was a peacock - he spent $40,000 a year on a country club membership to show off to his friends, hundreds of thousands on new cars, suits, clothes, and other random junk he didn’t need that he thought would make him look wealthy. Despite making all that money - he’s actually nowhere near rich. If he could just change his attitude towards money, he’d be rich in a couple of years. The basic concept of the book is that some people tend to under-accumulate wealth relative to their salaries, while others tend to overaccumulate it. You want to be one of the ones who saves more money than is normal at your salary range.
3) Knock some sense into yourself and go on a strict budget. Fixing your problems is ultimately going to be about willpower. You need to sit down, run the numbers, and come up with a set amount you’re going to spend each month on luxuries. And most of all, you need to never go over that amount - EVER. It’s very easy to start letting things slide and get back into your old bad habits. If you spend $500 and clothes and your budget is $500, then if you want to spend more you need to just sit and wait it out. Next month you’ll get the new stuff. This month you are just going to have to make due with what you have. Make a category for each thing you tend to spend on that you don’t absolutely need. Car, clothes, electronics, video games, eating out - all these kinds of things should have a category. And all should have a strict limit.
4) Have a spouse? Well, then “we need to talk…” You will never make this work unless both of you get on the same page. One person in a relationship can spend the household into the poorhouse. And the biggest problem for the peacock is they tend to live in pairs. You are going to have to sit down and figure out some way to convince your spouse that a secure retirement is more important than the second Porsche. This could well be your hardest task. Maybe the best advice I can give is to focus on how unpleasant it’s going to be when you hit 65 and suddenly have to live on Social Security because you didn’t save anything.
5) Get some new friends. If the people you are friends with really care that much about what you’re spending, I’ve got some bad news for you. They’re not your friends! Real friends do not care about how much money you have, and they aren’t going to worry about some kind of competition with you to see who can rack up the most toys. Stop trying to impress shallow people and go hang out with somebody else.
Discuss this on the Free the Drones Personal Finance Forums here.
5 Responses to “Dysfunctional Financial Personality #1: The Peacock”
August 14th, 2006 at 6:45 pm
[...] We’ve already discussed the Peacock, who feels the need to spend in order to impress. We’ve also taken a look at the Mattress Stuffer, who is compulsively afraid of risk and the stock market. Today, we’re taking a look at another specimen: the Foot Dragger. [...]
August 15th, 2006 at 3:58 pm
[...] Then you should check out Frugal Fashionista. Now, if you’re a guy, this site won’t be very interesting to you. It’s basically a blog that takes pictures of female celebrities and then finds the equivalent of their outfits at cheaper places. They give you links to online stores that sell all of them, so you can buy without having to search around for the stuff. It’s a well done blog and a good idea for one - the caveat I’d give to women is that if you buy the stuff they recommend, it’s usually still $200 or so. So you’re not really going to be saving much money with this blog - but if you’ve got a higher income, I think this would be a great resource for those female Peacocks out there who want to cut down on the cost of their plumage. [...]
August 18th, 2006 at 1:47 pm
[...] The Peacock, who splurges on expensive stuff to impress other people and keep up with the Jones. [...]
August 19th, 2006 at 10:02 pm
[...] This post is part of a series looking at the worst of the worst of people’s financial personalities. We’ve already discussed the Peacock, who feels the need to spend in order to impress. We’ve also taken a look at the Mattress Stuffer, who is compulsively afraid of risk and the stock market. Then, we looked at the Foot Dragger, who waits until the last minute to save for retirement. Finally, we saw the Emotional Spender, who can’t keep from blowing money to feel good. Today, we’re going to look at a personality you might not think is a bad one to have: The Obsessive Tightwad. [...]
September 11th, 2006 at 8:48 pm
[...] We’ve looked at six problem personalities so far in the series on personality problems that tend to affect your finances. We saw the Peacock, the Mattress Stuffer, the Foot Dragger, the Emotional Spender, the Obsessive Tightwad, and the Revolving Door Romantic. Today we’re looking at someone whose problems affect both them and the people who love them: The Moocher. [...]