Keeping up with the Joneses is one thing, but what happens when you’re keeping up with the Joneses who just won the Powerball? There have been several reports and articles written about the negative impact the lottery has on prizewinners. People who hit the jackpot tend to attract lost uncles and friends from years past who may be down on their luck. In many cases lottery winners feel guilty for having so much money without doing anything other than buying a lottery ticket, and they start giving it away. After a while, the money out the door can take on the effect of a snowball gaining size and momentum as it rolls downhill. Poor, poor lottery winner some say, nevertheless, the stories are there and they don’t stop with the lottery winners. A new report indicates the neighbors of lottery winners may be in trouble too.
The new study by the Wall Street Journal links a rise in bankruptcies to lottery winners nearby.
Research compiled and reviewed in the study of the affect of lottery winners on a neighborhood shows that people who live near someone who won the lottery is significantly more likely to file for bankruptcy.[i] The study suggests a strong tendency of members of a community or neighborhood to keep up with the lifestyles led by their neighbors and peers, “Income inequality induces poorer neighbors to consumer more visible (rather than invisible) commodities to signal their abilities to “keep up with the Joneses” to their richer neighbors.[ii]”
As people seem to be willing to leverage everything they have to buy the best cars and luxury items, the prices seem to keep rising. If, for example, people will pay $70,000 for a luxury car, the luxury car makers are going to price them accordingly. Reality television may be to blame, in addition to flashy lottery winners, where “Real Housewives” in destination locations like Beverly Hills, drive six-figure valued cars as if it is no big deal. If Hollywood sets the standard for being fancy and successful, people in other cities may start to mimic what they see on television and strive to show their friends and neighbors that they are just as able and successful as the people on reality television.
People do not earn the incomes we think they do, and we have more income than we realize.
In the actual real world, average salaries are not as high as many people assume. Here, in the Chicago area, salaries are measurably higher than other areas in the Midwest, but if you take a walk down Michigan Avenue on any given day, you might think that everyone in Chicago won the lottery. The reality is that the people in the fanciest of clothes could be from out of town or the suburbs, and decided to wear their best and be a spectacle on the Miracle Mile. The “rich” people you may see and wonder if they are lottery winners or well-paid professionals, might be average income earners, and are paying the minimum monthly payments on several credit cards they use to keep up with who they think are the Joneses, who are probably just as broke.
In contrast, many of us earn more money than we realize. There are plenty of people who live well on much less money than many might imagine. How do they do it? They use a budget, they only spend their discretionary income, and they drive a nice model vehicle, but one that might be a few years older, one they purchased when it was already several years old. In some circles it is a sign of “old money” to drive a more than 10-year-old Volvo or Mercedes. Your friends and neighbors might assume you drive the older model car because you are smart with your money and not cash-poor while trying to impress.
At Joseph Wrobel, Ltd., we want to give you the insight into smart financial decisions so you have a good financial future, and worry less about the Joneses and lottery winners.
Changing your mindset and habits with money and budgets is important to success after bankruptcy. If you lived on credit cards before, the bankruptcy wiping out those bills, may free up enough money so that you can live on cash income instead of credit. Instead of paying interest money to the banks every month, try paying yourself, putting money aside in a savings account, so you have an easier time when you find a great deal on that 10-year-old E-Class.
Joseph Wrobel, Ltd. helps people get control of their finances and a fresh start at financial freedom. The firm’s website contains informative videos about financial issues as well as bankruptcy protection for families who want a fresh start.
[i] The Wall Street Journal, Why You Might Go Bankrupt If Your Next-Door Neighbor Wins the Lottery, by Ben Leubsdorf, Feb. 16, 2016.
[ii] The Daily Caller, Neighbors of Lottery Winners Might Be At Risk of Bankruptcy, by Carly Rolph, Feb. 16, 2016.