Be Happy With What You Can Afford

In a recent online discussion, I received a question about a problem that plagues many people. It has to do with the Joneses, or rather the friends, family, co-workers or neighbors we try to emulate with our own purchases.

Intellectually, we know it's wrong to want to keep up with the Joneses. In an economic downswing like the one we're having now, we learn the Joneses aren't really so well off themselves. Their accumulation of bling has made them as broke as anyone else. And yet it's still hard to watch others amass stuff without feeling envious. It can make you feel like a financial failure by comparison.

That's what one person was feeling when she wrote to me during the chat. She opened with: "Michelle, I need you to smack me on the head, PLEASE."

I liked the use of all caps for "please." It meant she knew the answer but just needed confirmation. She went on to write: "I have a friend who is going into debt. She has $8,000 in student loans, $2,500 in credit card debt from her honeymoon, $2,500 in medical bills, and only $6,000 in savings. She is planning to buy a $300,000 house in June using (sigh) an ARM loan of 100 percent and using the $6,000 in savings for closing costs. Her mortgage would be 40 percent or more of her and her husband's monthly income."

I doubt in the tightening credit market that the friend can get a loan for 100 percent of the purchase price. Even so, the woman told the friend it was a bad idea to get a mortgage that would consume so much of her household net monthly income.

The friend is hardheaded. She's going on with her plans to purchase the house. Credit counselors, who see people long after they've made money mistakes, say if your mortgage is taking up more than 36 percent of your take-home pay, you are likely to get into deep trouble because that leaves little room to save or handle any financial crisis. If you live in a high-cost area, keeping the percentage of your housing within that range may be tough. If so, then just know that you will have to make deep cuts in other expense areas.

So here's this friend trying to help -- trying to give the right advice -- but now she's bothered by what her friend will have compared to her own situation. It bothers her even though she knows her friend may end up struggling financially to live so well.

She says: "My dream is (any) house instead of a cramped one-bedroom apartment or a new car instead of a 12-year-old car with over 125,000 miles on it or new furniture or even a nice haircut. But my husband and I can't afford it right now."

I knew there was a "but" coming before it came.

"I'm so blessed to have what I have, and yet I want to be the one getting a house . . . please just smack me. Do you have a quote that I can tack up on a mirror or carry in my pocket so that I remember at every minute how blessed I am? Sometimes, I am so foolish I forget."

In many respects, it's covetousness that has gotten us into our financial straits -- a love affair with debt, a shunning of saving. Our wants have exceeded our ability to pay -- truly pay, with cash, not credit -- for the things we see others enjoying.

Yes, this reader needs to be figuratively smacked, but not very hard. At least she knows better and just wants reassurance that she's the sane one.