A recent article in The Boston Globe highlights the
issues Bostonians are considering
related to purchasing homes in affluent areas. The piece
recites a financial-planning principle: “A
bit of perspective: In many parts of the country, the rule of
thumb is that housing costs should occupy a third of
one’s income. Here, that standard frequently
doesn’t apply.”  Because of
rising real estate prices and a desire to keep up with the
Joneses, many Boston families are spending upwards of 40% to
50% of their income on housing, which strains the rest of the
family budget and can lead to stress as those families struggle
to pay for the rest of life’s needs and the
additional expenses that come with an expensive neighborhood.
This article reminded me of a passage in The Millionaire Next
Door:

Perhaps you aren’t as wealthy as you
should be because you traded much of your current and future
income just for the privilege of living in a home in a
high-status neighborhood. So even if
you’re earning $100,000 a year,
you’re not becoming wealthy. What you
probably don’t know is that your neighbor
in the $300,000 house next to yours bought his house only
after he became wealthy. You bought yours in anticipation of
becoming wealthy. That day may never come.

– The Millionaire Next Door, p. 68.

While the numbers nationwide may not be as bad as those
currently playing out in the Boston suburbs, the concept of
spending today in anticipation of future wealth continues to
plague those who are unable or unwilling to understand the
long-term financial impact of large-scale purchases.