On many financial blogs there is a lament that one reason so many people have such a large debt load is that they are trying to “keep up with the Joneses” those mythical neighbors who always have newer and nicer things than us. I think this mentality really cuts to a fundamental issue about us as Americans. We visit a friend of ours and they show us their brand new 42” plasma flat screen TV. It is quite nice and boy it would be nice to have one in our living room. When you get home, your TV suddenly looks puny. You grow disasstified with it and find yourself looking at the TV ads in the Sunday paper and soon you are comparing brands and features. Shortly thereafter, you are unpacking your brand new TV and showing it to your friend.

Of course there is nothing wrong with a wide screen flat panel TV, but there is if you end of sacrificing important things to pay for it. Saving money over a period of time to buy that TV is great and reinforces hard work with a tangible reward. Paying off a new $2000 TV on your credit card at 21% interest over the next three years however only helps the credit card company. In addition to all of the extra money you pay (your $2000 TV actually costs $2712.60 when you are done paying for it) there is the stress the additional debt puts on you and your family, not to mention one more monthly bill to pay.

When my wife and I were struggling with our finances, I would think back to what it was like living with my parents. They seemed to be financially fine, although I have no idea if they truly were or not. We flew on vacations to places, eat out a reasonable amount, etc. I comforted myself with the thought that “well, they didn’t have as many things to spend money on as we do now. There’s satellite, internet, video games, DVDs, and other stuff. So, I’d tell myself, I’m not doing that badly. Of course it was all a lie to make me feel better. I was simply spending more money than I was making and there is nothing you can rationalize about that.

And that is the crux of the issue. We lie to ourselves so we feel better about the choices we have made. “I deserve a new car.” “This cell phone is out-dated.” “A new video game system will make me happier.” None of these things are necessarily true. They are just the rationalizations we make to justify our purchases. Again, there is nothing wrong with buying a new cell phone if you want to, assuming you do not go into debt to pay for it. The problem is our wants (what we’ve convinced ourselves are our needs) are greater than our income.

So the next time you feel that pang of envy when looking over what your friends or neighbors have and you don’t, consider the actual overall cost of such a thing. Would it throw you out of balance? If so, no matter what rationalization your internal voice is shilling, you don’t need it and shouldn’t buy it. That way when you come across something you really do want, you will have the money to make a stress free decision.