Staying Well Ahead of the Joneses

For Jonathan and Terry Yee, teaching their two children to be responsible with money has been easy so far. When birthdays come, their kids don’t request much, maybe a puzzle or a coloring book and pencils.

But sometimes when fancy catalogs drift into their Cypress home or when prime-time ads dance through their $20,000-plus “media room” or, worse, when a work friend shows off a new gadget, the Yees themselves have trouble saying no to the urge to buy.

“It’s a poison,” said Jonathan Yee, who runs a small computer chip company in Seal Beach. It’s a poison that “comes from the vast multiple sources of media that we see as a family. I’m outnumbered by television, my co-workers. I’m outgunned. We’re trying to be conscious [of spending], but we can’t always win.”

At one time, “status” meant “keeping up with the Joneses,” those mythical next-door neighbors. Now, millions of American families are spending more on fancy things and buying them at a faster rate--taking their cues not only from the Joneses, but also from the ubiquitous influences of popular culture, music videos, upscale catalogs, movies and hip sitcoms at a time when “Who Wants to Be a Millionaire” is one of the most popular shows on TV.

America has become a sort of consumer nation. People, now more than ever, are defining themselves by their possessions and acquisitions, and Southern Californians are on the leading edge of this trend, said Santa Monica financial advisor Brent Kessel. “You are what you have.”

The need to spend lavishly seems more powerful than ever, according to many consumers and those who study them. In part, they say, it’s because upper-class lifestyles are dominating the cultural landscape as never before. Now, ordinary Americans are comparing themselves with celebrities in InStyle magazine and the cyber-millionaires they hear about on TV.

American consumption patterns--what we buy, how much and how briskly we buy it--have intensified dramatically over the last few years. In March, retail sales boomed to a seasonally adjusted record of $269.2 billion, up from $217.3 billion in February 1997 when the nation’s economy hit the throttle after a prolonged recession, according to the U.S. Commerce department.

Much of the spree is being fueled by the nation’s long-running economic expansion, a generally bullish stock market and the phenomenal growth of high-tech industry, which has created a new class of nouveau riche and fostered high-flying expectations of how we should live and things we should have.

In the early 1980s, Forbes magazine listed 13 billionaires among the United States’ richest people; today it counts 268. Ten years ago, there were 1.3 million millionaires; today, 5 million. Some experts estimate there are 7.1 million households with an income of at least $1 million--and forecasters say that number could approach 20 million over the next decade.

Americans also are spending more each month than they save--a reflection, experts say, of frenzied consumption. Since September 1998, the monthly savings rate has hovered near zero. Commerce Department figures show the latest personal savings rate was just 0.4% in March, up from 0.2% in February, the all-time low. By comparison, the savings rate ranged between 5% and 10% through most of the last half of the 20th century. Even in the 1970s, during tough economic times and high inflation, the savings rate was about 9%.

Aspiring to the Good Life

In a Los Angeles Times poll conducted last fall, an overwhelming majority of suburban Southern California residents--as much as 91% in some areas--explained their spending habits by saying they weren’t trying to keep up with the Joneses but did stretch their financial resources to live in a particular community and to have the latest conveniences.

Still others, including many of the Southland’s blue-collar workers and recent immigrants--who need most of what they earn for basic needs--may spend their whole lives longing for such a problem.

For people like the Yees, who make a comfortable living, the urge to spend is manageable, if lamentable. But for many, it can end in a downward financial spiral.

Consider Ann Fort, who found herself close to bankruptcy, $20,000 in debt. The Lake Forest woman had been traveling spontaneously, dining out without considering the limits of her bank account and trying to match the lifestyles of richer folk.

“I see all these people, and I don’t know how they do it,” she said, now more than two years into a scaled-down lifestyle and solvency. “Maybe they are leasing their cars. I don’t know. Maybe they’re all just rich and living a perfect life. That’s certainly how it looks, doesn’t it?”

Juliet B. Schor, author of “The Overspent American: Upscaling, Downshifting and the New Consumer” (HarperCollins, 1999) and a professor of economics at Harvard University, believes television is at the root of overspending.

“There’s always a pressure to keep up with social norms, but what is normal now is very inflated. We spend less time interacting with real people and more time interacting with screens,” Schor said.

Americans today are more devoted than ever to electronic and entertainment media. One Harvard study showed an association between television watching and spending: For every hour spent in front of network TV beyond the U.S. average of 11.5 hours per week, respondents spent an additional $208 per year.

Internet usage also has soared, with the average U.S. Web surfer spending 5.3 hours a week online, according to a study by PricewaterhouseCoopers. Experts say there is some data to suggest that as people become more confident buying over the Internet, they will spend more.

“It’s all about who you compare yourself to--and these days that’s no longer your next-door neighbor,” said Eric Brown, a spokesman for the Center for a New American Dream in Washington, D.C., a nonprofit organization that advocates responsible consumption.

Television, film, newspaper and magazine images that glamorize the spending habits of America’s wealthy create a self-perpetuating cycle: The 20% who are the most affluent, according to studies, buy about half of what’s for sale, which spurs advertisers to cater to them, which, in turn, creates a distorted idea of normal living for the rest of the population.

Luxury Items Are Put Within Reach of Many

As a result, what Americans buy, and what defines status, has changed. Items once considered luxurious and elite appear in discount stores better known for low-priced bulk merchandise: Many Costco stores offer substantial discounts on high-end Movado and Tag Heuer watches that sell for much as $1,300 or $1,400 elsewhere. Where status once was driving a new car, it is now being able to buy stocks in an instant online or having heated leather seats and a Bose stereo system in your top-of-the-line SUV.

Lawn edgers are a yawn compared with super-thin laptops, personal motivation coaches who telephone with random inspiration and the $370 Joggeroo, an all-terrain stroller with 16-inch wheels, a one-handed folding mechanism, five-point harness, bike-style hand brake and quick-release wheels, all in a package weighing less than 20 pounds.

Intangible status symbols also figure into the spending calculus more than ever, experts say: the ability to speak intelligently about a vacation in Vietnam, the professional stature to “dress down” at work and, perhaps most important, having more free time than anybody else.

“There’s an absolute explosion in ways you can spend your time,” said Elissa Moses, director of global consumer and market intelligence for the electronics manufacturer Philips, which has a TV commercial showing college kids living in a beach apartment complete with a $15,000 television/media center. “The highest status is being able to choose what your experience is.”

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How Americans measure life’s experience has changed over the last century, as the population shifted from rural settings to cities and sprawling suburbs, which deter pedestrian encounters and neighborly interaction.

Even in Ann Fort’s Lake Forest neighborhood, where 30 years ago Cadillacs glided down the street and neighbors competed for the most attractive home, times have changed.

Her frontyard doesn’t matter like it used to, said Fort, 55, who has created her own world behind a 6-foot fence, in a backyard blazing with red and yellow flowers, draped with ivy and wisteria and populated by two aging turtles and a cockatiel named Nancy.

“I haven’t kept up with the Joneses for a long, long time,” said Fort, who operates a home business, Fort Dawn Daycare. “They all moved away.”

Yet a few years ago, she almost spent herself into bankruptcy trying to match the lifestyle she saw everywhere she looked. “At any time of day, [I’d be] walking around and it seemed like everybody was having a great time spending their money.”

Suddenly, she realized she was in an impossible and terrible tailspin, $20,000 in debt trying to maintain an image--like someone wrapping $100 bill around a roll of ones--but not knowing for whom. Buying expensive gifts and expensive dinners made Fort feel like a contender, she said.

“I didn’t care how much it cost,” she said. “It makes you feel, I don’t know, like an Orange County person or something. It looks like everybody lives like this. I get this real good feeling that I can be a real person. I do not want to die without having lived at all.”

A trip to a credit counseling service helped her get control of her finances and out of bankruptcy court. Today, she said she finds satisfaction in things as simple as buying a new plant. Still, she struggles daily to fend off tempting images of material success.

She sees them in newspapers and magazines and in the mothers who pull up in SUVs to drop off their immaculately clothed children.

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Perhaps no place is a better magnet for drawing consumers into buying things they don’t need than an electronics emporium. On a recent weekday morning at Fry’s Electronics in Fountain Valley, many customers compared the place to a giant impulse-buy rack. Even the magazine aisle was jammed with people browsing publications for ideas on what to buy next for their camera, computer, music or video systems.

A cacophony of products screamed for attention--from MP3 players to the fanciest computer cables to the newest microwaves that sense what’s cooking and adjust power accordingly. Some customers left with two armloads of electronic equipment and computer software “because it is there and it is cheap,” said Jesper Jensen, 35, an engineer who estimated he spends $300 each time he comes to the store, mostly to keep his computer well-enough equipped to play the latest flight simulator games.

Mitch Orman, who was shopping for a digital camera, said he wanted to spend only a few hundred dollars. But he knows it may end up costing more.

“I come here with a set idea of what I want to buy; if I don’t, I’ll spend way too much,” said the 27-year-old computer technician from Westminster.

“I can tell you that almost anything we want to do you can do with a computer built . . . in 1994,” Orman said. “But I buy things anyway to have the latest stuff. I don’t know why. . . . I buy a lot of video games. If I have extra money, I spend it on my computer.”

In line to pay for a shopping cart full of computer equipment, Atalanta Knatchbull gripped a laptop like a purse. She turned to her 17-year-old son and asked, “Do you want a printer?”

“Yes,” answered Tom Vereker, an art student. In less than three minutes, he traveled 100 yards and returned to the checkout line with a printer.

The compulsion to buy “comes from the media [and] those magazines,” said Knatchbull, 37, who splits her time between England and Costa Mesa. “It used to be $90 was a heck of a lot of money [to spend on her child]. Now, it’s $500. It’s totally mad, what I do.”

Knatchbull said she doesn’t go into debt for things like computer equipment or high-end blenders. But she realizes, as she buys, that she is “spending away the future. I don’t even think about pensions.”

“I have long passed the time where I am saving. For what?” she asked. “I’m spending what I should be saving to satisfy myself and my son materially.”

Knatchbull nodded at the laptop computer resting in the shopping cart. “I think, if I have that, I will feel spiritually rested. But in six months, [I know] I’ll have to replace it all again.”

Of his own acquisitive desires, her son said: “Whether it is with a computer . . . or with other things . . . we are trying to keep up with the times and trying to create our own realities. It’s like we are trying to make things more and more real with material things.”

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Visions of a society buried in merchandise and debt, a specter raised periodically by Federal Reserve Board Chairman Alan Greenspan, have spurred a new movement within the world of financial planners.

Karen McCall’s San Francisco company, Financial Recovery, trains staff members to be both financial planners and psychological counselors. McCall, who studied mental health in college, gets about 20 calls a week from people who want to get an “emotional handle” on spending problems.

The way Americans buy is rooted in a deep psychological place, McCall said, one that can’t be managed simply with a budget.

“It’s a very therapeutic process,” she said. “It’s not just about making a spending plan and sticking to it. It’s more than that.”

The trick, she said, is convincing clients they can maintain an upper-crust lifestyle but scale back with small changes that add up by year’s end. Get the manicure or the fine wine--so you don’t feel deprived--but don’t get them as often, she said.

Similarly, Brent Kessel, owner of Abacus Wealth Management, has become one part budget planner and two parts counselor--a mix that evolved in response to Southern Californians’ penchant for defining themselves by what they own.

“I do a lot of work with people’s relationship with money,” Kessel said. “You have to do some deep goal work with yourself. If you haven’t done it, you’re helpless when you’re getting barraged with all these messages of 20-year-olds making millions. If you don’t know what you want to be--most people don’t--you feel like you want to be everything that the media talks about.”

There also is a growing segment of society that Harvard professor Schor calls “down shifters”--people who are taunted by myriad products in the catalogs that fill their mailboxes but who resist to another extreme.

They don’t blow-dry their hair, they buy organic groceries in recycled bags and make their own clothes. Schor believes the down-shifters, to whom she devotes a third of her book, eventually may help balance hyper-consumerism.

For many, however, the reality is more likely to mirror Jonathan Yee’s approach. He’s got his eye on a new digital camera--able to take both photographs and video--that he heard about the other day from a bragging colleague.

“I’ll have one,” he admitted. “I give it three months.”

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Spending More, Saving Less

Americans’ personal savings rate dipped beolw 3% of disposable income through most of 1999. In February, the rate dropped to 0.2%, then ticked up slightly in March to 0.4%.