It is interesting to observe that even some of the wealthy are beginning to falter when it comes to avoiding the Jones’ consumption style. It appears that many of them are now trying to keep up with the super rich.  Consumption and debt increases are becoming more common amongst the affluent.
In fact, some sociologists and economists say the rise in wealthy people’s debt stems in large part from the growing pressure among the elite to keep up with richer peers. The biggest disparities in wealth today are among the rich, with mere millionaires getting shoved aside by decamillionaires, centimillionaires and billionaires.
The haves are borrowing more to keep up with the have-mores. Those in the 95th percentile to 99th percentile of wealth have almost twice as much debt as the top 1%, as measured against assets. Economists and wealth managers say it’s the single-digit millionaires who are becoming the most stretched, as they borrow to match the lifestyle of even-wealthier people.
The result, says Dalton Conley, a sociologist at New York University who studies status, is even more debt. “What we’re seeing is the top 1% struggling to keep up with the top 1/10th of 1%,” he adds. “And those people trying to keep up with the top 1/100th of 1%. There is a drive by the merely rich to keep up with the obscenely rich.”
With some measures showing prices for high-end goods outpacing the broader inflation rate, the wealthy are increasingly looking beyond mortgages to use debt for buying beachfront homes, yachts, cars and other collectibles. Private bankers say loans for jets are among the most popular.
This is a dangerous precedent among the mere rich or single digit millionaires. The fact is, no one is immune from getting stuck in the consumerism trap. Even millionaires. Trying to keep up with the Jones’ is the surest way to financial bondage.
Do not worry about who has what. Focus on what financial independence means to you and your family. Not what everyone else would have you believe it to be.

A peculiar article was recently published by Smart Money suggesting that living completely debt free is a bad thing. That your credit score can actually be worsened by having no debt! The powers that be are trying to make us believe that debt is actually good for us!
Apparently individuals are starting out in life with piles of debt to work off. This includes the common student and credit card debt. The rate of debt growth is escalating. So the financial institutions lending us the money are doing a great job getting people hooked on credit. A statistic was issued by the Fed: Since 1995 no mortgage consumer debt has increased 112 percent to nearly $2.4 trillion, according to the Federal Reserve.
Most professionals agree that consumer credit is a bad thing. What was troublesome about the article was the idea that living debt free is somehow becoming square.
A story was told about a person who decided to buck the trend by trying to live free of any credit.  He was doing a good job until he needed to apply for a loan. He apparently had no credit history, thus he was not given any credit. My question is what is so bad about that? If we can’t get a loan, and need to pay cash, then we’re going the right direction. He had indicated that “he doesn’t want to find his options limited.â€?  Wow!
The article states:

“In an economy humming along in part because of consumers’ happy embracement of debt, those who are debt-free can find themselves viewed more as pariahs, rather than role models. Most lenders consider a consumer with no credit history only slightly less risky than one with bad credit, says Craig Watts, a spokesman for Fair Isaac, the company that creates the almighty FICO score.
“Consumers have proven time and again to be creatures of habit,” he explains. “Without some kind of track record, the consumer is a cipher.” “
Is this interesting? People who actually commit to live debt free are ciphers? That is a pathetic statement. Notice where the quote came from; Fair Isaac, who is with out a doubt lobbying along with the big banks wanting us to borrow more and more!
Look, I have no problem with taking out debt to improve your credit score, as long as it’s invested in something that will go up in value over time, and someone else besides me and my income are paying for the debt service.

An interesting pool just came out by Banrate.com asking Americans how they felt about budgeting. The results seem to be a bit contradictory.
In the poll, it was suggested that American’s felt budgeting was very important.  Ninety percent of respondents say it’s “essential” or “very important” to have a personal or family budget.
The poll further indicated American’ understand the virtue of keeping a budget. The idea of what we teach at Prosper is what American’s believe to be important.  “You create a monthly spending plan, and you pat yourself on the back for doing an excellent (or at least a good) job at sticking to it, even when unexpected expenses try to knock you down.�
The question is if the majority of Americans really do adhere closely to a budget. And do most people truly avoid buying non-necessities on credit? If that’s the case, what do they use all those credit cards for?
Maybe the poll respondents were describing how they wish to be, instead of how they really are.
Apparently American’s in are trying to put the best foot forward. They know what they need to do, but are not doing it. “There’s probably a lot of wishful thinking in this response,” says Jared Bernstein, director of the Living Standards Program of the Economic Policy Institute, a Washington think tank.
“I don’t think people were telling the truth in the poll,” says Robin Byford, a certified public accountant and Certified Financial Planner who helps oversee financial literacy education efforts for the Oklahoma Society of CPAs. If people really did stick to carefully prepared budgets, they would spend less and save more, she says. “As a whole, we’re spending more than we’re making.”
“The easy access to credit means the average American doesn’t need to budget any longer, because they can always borrow to meet their needs,” Manning says.
“For people who are spending beyond their means, and doing it impulsively, they’re likely to be using credit cards over any other form of borrowing.”
The study continued to explain the lack of financial education and what must be done about it.
Fortunately, your Prosper coach is hear to help you.

Kids are living in the entitlement generation, the shadow of their Baby Boomer Parents. For some reason after World War II, children developed an attitude of having it all and having it now.  This has gotten many people of both generations in a load of debt. One of the biggest things that I’ve seen as a coach at Prosper is that a lack of financial knowledge is multi generational. The inability to manage money is transferred down to the kids, then their kids, and so on. Many people see personal finance as a boring, painful thing to contemplate. This being the case, it is no wonder that children end up not knowing how to manage money.
The question then is what can be done to circumvent the perpetuation of a dearth of financial intelligence?
Here are a few ideas to get started:
The challenge is to develop a series of cumulative steps that will make the world of personal finance visible, credible, and appealing to young people. What follows is a collection of various steps to consider for creating financial coming-of-age traditions tailored to your family’s values and circumstances. They are offered as a way to jumpstart brainstorming. Specific traditions will obviously vary for each family according to family values and family wealth.
To some, this first idea may be considered dangerous or contradictory. It is however critical to teach children about the proper use of credit. Once a child turns 16, consider getting a credit card in the child’s name, with the parent as the guarantor. At age 18, consider a low-limit card for which the child is responsible, in addition to a card in the parents’ name to use in case of emergency and/or for purchases that in your family are paid for by the parent. Help your older college student to order a credit report from one of the national reporting agencies (www.equifax.com, www.experian.com, or www.transunion.com).Throughout the college years, and especially early on, keep the communication about credit card use ongoing.
In families where inheritances in the form of trust funds are part of the picture, consider working with your attorney to develop a series of steps designed to draw your child gradually into trust management while educating them about the world of personal finance. For example, trust documents can specify that young adult heirs become co-trustees with limited responsibility and authority before assuming full responsibility at a later age.
At age 18 a child can open his or her own checking and savings account. Consider making a parent/child visit to the bank to open these accounts an honored coming-of-age ritual in your family. During the visit with the bank officer, review how to track deposits and withdrawals, arrange for an ATM debit card and a first PIN number. Review safe ATM machine habits. Help your child think through what percentage of earned income, and of gifted monies, will go to checking versus to savings. Use this opportunity to promote the notion that “in our family”—or at least in smart circles—people save 10% to 20% of every dollar they earn, starting with the first dollar.
Once a child has earned income—income reported on a W2 form at year-end—consider opening a Roth IRA account. When the child turns 18, she can directly open an IRA account herself. Explain that Roth IRAs are one of the most powerful personal financial savings vehicles available, and a potentially important source of long-term wealth. Contributions are made with aftertax dollars, but then grow tax-sheltered and (with reasonable planning and under current law) also escape taxation at withdrawal.
To fund a Roth IRA for a young adult, it is necessary for that young adult to have earned income. However, there is no IRS prohibition preventing parents or grandparents from funding all or a part of the contribution, if they choose to do so. Some families offer a parental (or grandparental) matching contribution, some families fund the entire contribution, while other families make up the difference between an agreed upon child’s contribution and the IRS maximum allowed contribution—or between an agreed upon child’s contribution and the minimum amount required by the IRA company to open an IRA.
Children grow up with an intuitive notion of their family’s standard of living—but no dollar amount to associate with that standard of living unless parents share that information with them. At some point it becomes appropriate and helpful for parents to share information about their income and wealth with their children, a process that is perhaps the most profound financial coming-of-age ritual of all. There are few higher honors for a child than when a parent trusts the child with family’s personal financial information. For this reason, coming to know one’s own family net worth and income level, as well as the financial history and philosophy of one’s parents, can be a fruitfully maturing experience in itself.