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Trying to keep up? You're jonesing for debt

Is your wallet suffering from your social competitiveness?  TODAY Financial Editor Jean Chatzky shares tips to  help you curb your jealousy-driven purchases.
/ Source: TODAY contributor

Are you always struggling to keep up with the Joneses? You know the feeling — your neighbor gets a new car, and all of a sudden you feel a bit behind in the game of life. It happens to everyone (these days, I'm eyeing the renovations shaping up across the street) but a pattern of constant one-upping can turn into a pretty vicious cycle. Not only does it affect your mood, it can put a pretty heavy burden on your credit cards.Several recent studies have shown that once we get past a certain level of comfort, money really doesn't buy happiness — at least not in the long run. Why? Because you'll adapt to extra cash pretty quickly, and soon enough it'll no longer feel as if it's extra, said Dr. Catherine A. Sanderson, associate professor of psychology at Amherst College in Massachusetts. Kind of like how you thought your car was pretty sharp, until a newer model was parked next door.Instead, what people really look for in money is the sense that they are doing as well, if not better, than those around them. That's one point made in the new book "Green With Envy: Why Keeping Up With the Joneses is Keeping Us in Debt," by long-time financial journalist Shira Boss. Boss said that the social side of our finances — a need to keep up with friends, neighbors and colleagues through expensive dinners, designer clothing and, yes, new cars — is a huge contributor to high debt and a negative savings rate in the United States.Here's how to tame your need to stay on par:Know you're not seeing the whole picture
Several years ago, the gossip mill in Boss's Upper West Side apartment building was a buzz about her new neighbors, who apparently paid for their place in cash. As jealousy set in, she decided to get to the bottom of the rumor, and found out it was just that. The neighbors did, in fact, have a mortgage, and piles of credit card debt to go with it. "It shouldn't be any of our business what our neighbors are doing with their money, but we can't help but notice and compare ourselves. Having some facts about the situation around you really does make a difference and help you feel better," she explained. The truth is, you don't know how your neighbor paid for that car, and he could very well be in a boatload of debt over the purchase. Instead of feeling jealous, focus on the cash he's likely forking over each month to pay it off — with interest.Lose your own phony appearancesYou'd be surprised how refreshing it can be to be open and honest about your financial situation. If money's a little tight and you can't go out to dinner with friends this weekend, go ahead and say so. It may be tough to get the words out, but it will be even tougher to pay off that credit card at the end of the month. You can bet your friends have at some point been in a similar situation, and will understand your need to lay low for a while. You might even inspire changes in the way you socialize -- potluck dinners at home instead of expensive restaurant meals, parties instead of nights out on the town. If you truly can't come out and say you're low on cash, think of a way to sugarcoat it, but keep it honest. Explaining that you're saving up for another goal is a completely acceptable way to beg off.

Don't get ahead of yourselfYou might be tempted to buy a big fancy house, and maybe you can even pay the mortgage. But what about the other expenses that go along with it? Furniture? Health? And that's not all. If you live in a well-off neighborhood, you're buying into a lifestyle, and the pressure to keep up may catch up with you. "Fitting in with those around you ends up being a huge cost," said Boss, "so where you're going to live is an important decision." For the book, she interviewed a bankrupt couple in a gated community in Orlando, Fla. They were able to juggle the mortgage payments just fine, but the culture — country clubs, expensive dinners — put them over the edge.Widen your pool of comparison
Our natural instinct is to compare upward only, but rarely do we look at those less fortunate. "We're going to compare," Sanderson explained, "but we can chose the dimension." Just a short drive through a less privileged neighborhood can change your outlook, but an even better solution is doing some volunteer work. Check out a local soup kitchen or after-school program that allows you to create personal connections with the people you're helping. The experience will not only reinforce how lucky you are, but it'll also give you a taste of the problems experienced by others, offering some much-needed perspective.Spend your money the right wayFirst, save up for what you really want. Not only will it give those credit cards a rest, it'll weed out the jealousy-driven buys from the things you honestly value. Then, to get the most return, put that money into experiences, like vacations, classes, concerts and the theater. "If there are things that people are spending money on that are providing them with a sense of internal motivation, that is highly correlated with happiness — taking a trip to do something that you find rewarding, for example," Sanderson noted. These experiences create memories that aren't as easily taken for granted.

With reporting by Arielle McGowen.

Jean Chatzky is an editor-at-large at Money magazine and serves as AOL's official Money Coach. She is the personal finance editor for NBC's "Today Show" and is also a columnist for Life magazine. She is the author of four books, including "Pay It Down! From Debt to Wealth on $10 a Day" (Portfolio, 2004). To find out more, visit her Web site, .