Saving up with the Joneses

For Americans, the concept of "keeping up with the Joneses" is almost as familiar as our reverence for mom, the flag and apple pie. For years, we've been eyeing our neighbors' purchases, and striving to equal or one-up them in consumerist impulses.

This notion of staying even with the Joneses isn't highly regarded by savvy money managers, who believe it encourages living beyond our means when we should be adding to our savings account. But another, newer way of keeping tabs on others' spending just may have more beneficial impact.

Keeping up with your budget

With the proliferation of online personal finance management tools such as Mint and Bundle, people increasingly enjoy insights into the spending patterns of neighbors. These insights may give users an idea as to how they compare to others in their locale.

Matt Bell, a money management expert and author of MattAboutMoney.com is a regular user of Mint himself, and reports the primary benefit of such management tools is to track your own spending.

"For many years, the idea of using a budget has been very unappealing to people," says the Riverside, Illinois-based writer. "I've taught workshops for years, and this has always been a non-starter. But what Mint, Bundle and other similar services have done is make budgeting as cool as it's possible for it to be."

Now, he says, the budgeting is done online, is easier than ever, and is therefore more attractive to those online all day anyway. "Once you get past the hurdle of giving passwords to your bank accounts and credit cards, the service takes a lot of work out of the budgeting process, essentially tracking your electronic purchases for you," he adds.

Keeping up with your savings

Bell believes a number of positives flow from the use of services like these. "In terms of glimpsing these averages and what other people are spending, I see a nice positive to that," he says. "It goes along the lines of making budgeting cool . . . In a kind of collective sense, we can peer into our neighbors' spending habits. And people do have a kind of financial voyeurism. What do people spend on clothing, on vacations? This gives them access to information that before was off limits. Anything that makes budgeting more attractive is something I'm all for. These features make budgeting fun, and might draw more people in to using a budget than otherwise would."

As a result of using the services, financially savvy folks are able to gain an understanding of where they could be saving more, and where it might be possible for them to loosen the purse strings, draw from their savings accounts and live a little.

Bell also offers some points to take into consideration. "I would rather have as a benchmark a number of people who are fantastic at managing money, and compare myself to them," Bell asserts. "If you compare yourself to the average, you might have a false sense of confidence that overspending and under-saving are okay."

Furthermore, average Americans spend too much, have too little in their savings accounts and too much debt. They should never be considered good role models, so it makes little sense for a conscientious individual to compare him or herself with that example, Bell adds.

All things considered, though, Schwark Satyavolu, CEO of California-based BillShrink, applauds the concept of comparing your spending against an average, as opposed to against the neighbors next door. "If the person next to you is driving a BMW, and that encourages a high level of spend, that's bad," he says. "But when it's a broader average, and you don't link this to one individual, you're unlikely to overspend. In other words, the average doesn't overspend--though your neighbors, the Joneses, may."

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