Herd Mentality vs. Financial Freedom: Escaping the Norm

Social Boundaries

Money has a way of breaking people into classes and throughout history we have always had a class system in our society. In our modern society we often talk about where the majority of people spend their lives – the middle class. This is merely the middle ground between two extremes; the poor and the wealthy.

What’s My Status?

statusA certain minimum yearly income is decided upon, often called the poverty line, (currently $25,252 threshold for a single-adult household) which determines your status. Below that line and you are barely surviving, possibly homeless, and likely reliant on social assistance programs. Those whose income hovers near the poverty line have been labelled the working poor.

Moderately above the poverty line and you have the basic necessities, but you must continue to work and earn income to maintain your status. When you have sufficient money that you can sustain yourself without the need to work you are truly wealthy.

What’s the Problem?

The fact that our income and savings divides us into groups or classes should come as no surprise. When these classes are separated by a rigid boundary that cannot be crossed without great difficulty I see a big problem.

Herd Mentality

Once you get used to being in a certain social class there’s a tendency to think like everybody else in that class. In modern lingo we call that herd mentality. The problem is herd mentality rarely sets people up for success. The herd chooses to spend freely, take on consumer debt, indulge in instant gratification, shun emergency funds and avoid saving for retirement. Almost the opposite of sensible living – enjoy life while preparing for the future!

How Do I Improve My Situation?

If you choose to improve your financial situation you must first have the strength and willpower to go against the herd. It’s much harder than it seems.

Sadly, as you begin to improve your financial situation there is a general tendency to alienate yourself from your friends.This is especially true if your friends have no desire to improve their financial situation.

Set GoalsYou’ll become that outsider who doesn’t spend money like the rest of the group. You’ll participate less in their costly activities since you are now devoted to sensible living which includes saving and planning for your future.

Popular vs. Financially responsible

As if it weren’t already hard enough to become financially responsible, you now have to face the real possibility of becoming unpopular with your friends. Expect criticism and ridicule. Over time, they’ll either follow you or abandon you.

friendsFor the few who do manage to succeed under these very tough circumstances a new social network is often created with financially aligned friends. Surrounding yourself with a group of like-minded friends greatly increases your chances of success. Peer pressure works both ways.

Their are a number of blogs, podcasts and facebook groups dedicated to people who want to live sensibly. Check out:
True Money Saver
Inspired Budget
Frugal Friends
Maple Money – Tom Drake
Money Sense
and of course our own blog Manage Your Money

The consequences of crossing these imaginary class boundaries will be one of the toughest obstacles to your financial independence.

Water BarrelThe BalanceIn my E-books (“Water Barrel” and “The Balance”) I discuss simple methods to live sensibly for today, take charge of your financial affairs, and invest safely for the long term. For more information please visit David Penna Amazon.

As always, I am not a qualified financial advisor. I just relate financial management to my own experience which may not resemble yours at all. Advice is frequently worth exactly what you paid for it. Most of mine came from expensive experiences.

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