Comparing ourselves to others is almost a national past time. People spend hours in this country scouring Facebook and comparing their own lives to the fictional lives of others. We publish the wealthiest people as if it is some sort of competition to see whom can be the richest. We as a collective society drive more expensive cars in some self imagined “Keeping up with the Jones” personal crusade. And yet what is the impact of this comparison? Have you ever considered the costs of comparing yourself financially to others?
High School Reunions, the Ultimate locale for Comparing Yourself Financially to Others
A little over 7 years ago I attended my ten year high school reunion. A high school reunion seems to be the ultimate location for comparing one self to others. I couldn’t help but notice that Mr. Popular was barely making due and the guy whose rich parents bought him everything now worked for mom and pop. I was guilty of comparing myself to those people in that group as I’m human. And yet the most poignant memory of that night was not my perception of myself compared to my high school peers. The memory that stands out was a friend from high school commenting on my personal Facebook page, that based on what she saw there it would seem I was Bill Gates.
Now I have done well, there is no denying. However, to look at my personal Facebook page around that time one would think I was a high roller. I had pictures of my then new Corvette. Pictures of a friend of a friend’s multimillion dollar garage. Pictures of me traveling all over the world for work with the resulting weekend vacation spots. Of course no one reading my Facebook page and not having seen me for the last decade would know all but the Corvette were not my cars. The trips meanwhile were 90% work travel. Other then the Corvette I was just as frugal then as I am now. Those who knew me more recently actually tended to use the term tight fisted to describe me, except when it comes to my friends. The Facebook page though had given a false image of my personal status to my peers. They had already begun comparing themselves financially to me.
Perception is Not Necessarily Reality
The problem here is quite obvious. Their perception of me wasn’t reality. The same is usually true for that person driving the real life fancy car. The guy at work with the new BMW 7 series is just as likely knee deep in debt as well to do. And yet our societal natural position is to look at it and think that guy has it made. Worse if we give into our base instincts we end up wanting to do as he has. Buy our own BMW 7 series because if he can have one so should I. This of course spirals into lifestyle inflation, debt, and ultimately having to work until you’re 90.
Unhappiness and Financial Comparisons to Others
But I digress, the overspending is only a symptom. What’s really happening is we are allowing ourselves to be unhappy by sake of comparison. In 2012 the Federal Reserve released a paper showing that those who live in wealthier neighborhoods are more likely to commit suicide. That seems odd on the surface until you dig further into the data. Apparently it was the lower income folks in the higher income areas. The authors linked this to unhappiness brought on by making “unfavorable interpersonal income comparisons”. The unhappiness manifests itself in trying to “keep up with the jones” in most people, though obviously the study shows in extreme cases it leads to suicide. Neither is a desirable outcome. As such we must resist the urge to compare ourselves financially to others.
Comparison is Human Nature, To Resist or Give in?
We’re all human, and temptations surround us every day to make these comparisons. To be honest I don’t believe it is possible for me to just stop making the comparisons. Even when I read magazines like Forbes, I find a bit of me wondering why I’m not selling my Unicorn’s IPO for over 1 Billion. Never happen, which means I need to temper these feeling to both keep happiness and financial progress. The way I do so is to wherever possible redirect my financial comparisons from a specific person towards the average person. I also redirect myself from a useless comparison like how many things I have and towards something that positively impacts my life. For example where is my net worth compared to the average person of my age? According to the 2011 Census the Median net worth of someone my age (35-44), that is if 11 people walked by me the person in the exact middles net worth, would be 35K.
Even more shocking, I would be in front of 75 out of 100 people if I had $128K to my name before I turned 45. These numbers are scary low, but the impact on society of such numbers is a post for another day. The point here is if you have your financial house in order even slightly, you’re setting the world on fire compared to at least 50 of 100 people you’d cross paths in this country. Chances are good you’re probably ahead of at least 75. If we include all the humans on earth, including those in developing countries, you’re easily in front of 99. This is not to belittle others or the concerns there of, but it is to remind you of how good you have it. In my case it also reminds me that what you see is not necessarily reality. If 75 out of 100 people have less than 128K in my age group, there is no way the 1000 or so 3 series BMWs in my area are all driven by Dupont heirs. It brings me back to earth and stops me from comparing myself financially to others.
Give it a try, the above link has a view of the 2011 Census data. Where do you sit on the scale? I’d be willing to bet if you’re near the upper age of the range or you’ve been working on financials for a while, you’re blowing these numbers out of the water. If not I suspect in a matter of a few years you will be. Hopefully like me, this advice helps you to get over the concept of comparing yourself to others. If you have any other techniques to avoid comparing yourself financially to others please feel free to share them below.