Trying to Keep Up (Jeff Hankins Commentary)

Let’s Return to the 1990s.t

The labor market was tight. The technology and telecommunications sectors in particular were booming and in dire need of young talent to meet the demands of rapid growth.

Suddenly college graduates with no experience were commanding starting salaries of $50,000 because they could, say, write computer code or sell cellular phones. Then bidding wars began as companies started trading talent.

The ones who went into cell phone sales thought they were superstars as their commissions soared toward or beyond six figures. What they didn’t realize was that they were mostly very well-paid order takers. After critical mass was reached, the telecoms wised up, reworked commission plans, and the exodus and layoffs began.

In the technology arena, writing code became a commodity. You have to be able to do more today in terms of thinking through business plans and technology application, because coding can be outsourced to India for a lot less money.

Some of these 1990s’ graduates continue to do well and have excelled. But I see just as many who tasted financial success, didn’t develop the level of expertise they thought they did and today don’t understand why they can’t command the compensation that they did five years ago.

Here’s where the problems start.

One becomes acclimated to a certain lifestyle at a young age because cash is flowing better than he could have ever imagined. Likely he’s surrounded by friends in a similar situation.

Suddenly he can’t keep up anymore. He has to take a substantial pay cut with the next job. His fat investment account full of technology stocks tanks. But he feels the need to feed the lifestyle beast he’s created for himself and his family.

Some land in debt they can’t overcome. Others turn to embezzlement. Parents step forward and try to help, putting their own finances in jeopardy. Some lose friendships after borrowing money they can’t repay.

There’s no easy way to tackle this issue without coming across as judgmental. But my purpose is to express concern, and this concern is shared by plenty of others who have encouraged me in recent weeks to raise the level of awareness and debate.

I can think of at least a dozen people during the past year who have fallen into the trap of trying to keep up with the rich Joneses. Some we’ve reported about because of lawsuits or criminal charges, and others we haven’t — I just happen to know about troubling situations.

We think of social peer pressure as a teenage phenomenon. But in wealthy pockets of Arkansas, the peer pressure continues, and the stakes may be higher.

We all have to ask ourselves: What are we doing that promotes or contributes to the pressure? And most importantly, am I living within my means?

As a resident of west Little Rock, I’m surrounded by neighbors who represent the wealthiest 1 percent of U.S. residents. From the country club to church to business, I interact with successful and often wealthy people of all ages. Residents of the Heights in Little Rock, the Pinnacle Country Club neighborhood in Rogers and the Ridgepoint Country Club development in Jonesboro could say the same thing. Our sense of normal and typical is far from reality for most people.

Do we do whatever it takes to fit in at all costs for fear of being ostracized? Where are the limits?

When my wife and I decided to start building a house last year, we grappled with the issue of what we could afford. We couldn’t stand the thought of spreading ourselves too thin. We sought reassurance from financial advisers and evaluated short-term and long-term needs and goals. It’s hard for me to imagine thinking any other way.

I didn’t consciously think about trying to keep up with everyone else in west Little Rock. I was focused on what I wanted for me and my family, and I didn’t need anyone else to establish my high expectations.

But we’re all subconsciously affected by our surroundings and friends more than we would ever care to admit when it comes to lifestyle.

This isn’t a new phenomenon by any means, but traditionally it was people in their 40s and 50s who enjoyed long careers, systematically accumulated wealth and were then in a position to step up their lifestyles.

Now we have a generation of 30-somethings whose expectations have been skewed by a remarkable stretch of economic prosperity. Some have succeeded, some are getting by and others have turned to desperate measures to save face.

It’s sad and worthy of concern and discussion.

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Since the above column was published in Arkansas Business on Feb. 28, let me share some of the reader feedback I’ve received, and you’ll notice it’s from multiple age perspectives:

“I’ll never forget when this subject first crossed my mind in regard to the generation on which your editorial was focused. I overheard some social-hour talk at the country club during which a young woman who was obviously no more than a couple of years out of a Fayetteville sorority house referred to a $250,000-plus home in Pleasant Valley as a ‘starter’ home.

“That home, which she clearly considered to be a temporary rite of passage on her way to one more in keeping with her expectations, had been built in the mid-’70s by 55-ish members of my parents’ generation as their ‘dream’ home — the kind they had worked all their lives building a successful business to be able to afford.”

“I am 37 years old and have achieved more than I ever expected to achieve since my law school graduation in 1993. As a result, I have more money and more material possessions than my family needs.

“Like you, I have followed with dismay some the same examples of financial and personal self-destruction portrayed in our community of late. It seems sometimes that everyone is engaged in a frenzied ‘arms race’ to accumulate money and things at all costs.

“I have come to the conclusion that material possessions, beyond the subsistence level, do not bring happiness into our lives. Relationships with people do. Thank you for saying what needed to be said.”

“I worry about this in regard to my teenage son. My parents were born in 1913 and lived through the Depression, so I grew up with aluminum foil being saved and reused. My son whimpers when he can’t have a new cell phone.”

“Wonderful realization of what is really going on locally. Being in the real estate industry, I see people buying homes that can’t really afford them.”

“It’s almost better to work in a career that is not overcrowded and to keep your standard of living well under control. Accumulate six months of living expenses in a savings account and start your retirement plan well before you are 40 or 45.

“That’s the best thing I ever did. I had to do it over my wife’s objections. She certainly is thankful about it now. We know of so many couples our age that can’t afford to retire comfortably.”

A final thought that I meant to include originally: Young married couples put themselves under tremendous financial stress because they want the standard of living that they became accustomed to while still at home. In most cases, their parents didn’t start with that standard of living; they worked their way up to it by accumulating wealth and possessions and moving up to a bigger home.

Let the discussion continue.

(Jeff Hankins, president and publisher of Arkansas Business Publishing Group, can be reached via e-mail at [email protected].)