We like to compare ourselves to others all of the time when it comes to finances. We see what our neighbors are driving and wonder how they can afford that. We see the private schools our friends send their children to and wonder how they can afford that.
The problem with comparing yourself to others when it comes to finances is that you are always going to be making assumptions. This is because you never know all of the information you need to make an informed decision. Here is what I mean by this.
Here are two classic examples. Have you made either of these judgments about other people?
The Showy Rich. You see your neighbor drive up his brand new BMW and you see his wife’s Lexus. She stays at home and raises the kids and you wonder how in the world can they afford their house and new cars all of time while you are barely getting by? While it appears that they are making ends meet, you really have no idea. They could be rolling over old car loans into a new loan on that BMW. For all you know, his monthly payments could be $900 per month and he is saving nothing for retirement. He looks rich, but is really poor.
The Poor Rich. Then there is the other person at the end of the block. She has a decent paying job, but is still driving around in her late 1990’s Honda Accord. Whenever you see her, she is dressed in sweats or just a t-shirt and jeans. She doesn’t look like she has any money. In fact, she looks like she can barely afford her house. But is she really that poor? Maybe she maxes out her retirement plans every year and saves on top of that in taxable accounts. She might be a millionaire and you have no idea. Have you read The Millionaire Next Door?
Comparing Yourself To Others Is Pointless
In both of these classic examples, you make judgments on people simply based on how they carry themselves. This gets us into trouble, especially when comparing ourselves to them. You might feel great about yourself compared to the woman at the end of the block because you have nicer clothes and a newer car.
On the other hand, you might feel bad about yourself when comparing yourself to your neighbor with the new BMW. For all you know, you could be financially worse than the woman at the end of the street and better off than your next door neighbor.
At the end of the day, none of this matters. It doesn’t matter what your neighbors or friends have or don’t have. All that matters is how you are getting by financially. This is why they call it personal finance. What might make sense for you financially might not work for someone else.
There is no exact path to go down in life when it comes to finances. You don’t need to own a house by 30, and buy a new car every 5 years. All that matters is that you are spending less than you earn, are saving for your retirement and don’t go into unnecessary debt.
How to Stop Making Comparisons
But, comparing yourself to others is an easy trap to fall into. The next time you feel the urge to do so, or catch yourself doing so, here are a few things to remember:
Stop thinking about them and think about yourself. What are you able to afford to do now that you weren’t able to afford a few years ago? In what ways have your finances improved?
Comparisons are unfair. We look at the best things we think others have that we don’t. Flip this on its head. What do you have?
Everyone is different. No one makes the same income, has the same interests, has the same family size etc. With so many variables, it is virtually impossible to compare yourself to others accurately.
You will always fall short. No matter how much you have or how perfect of a life you have, you will always find some fault when you compare to others. So if you can never win, why even bother playing?
Comparing yourself to others is a waste of time and energy. We only get so much time in this life, why not use it for the positive instead of trying to see if we are better or worse than someone else? Remember that at the end of the day, finances are personal and what everyone chooses to do with theirs is their choice. Be happy with what you have and strive to continue to grow as a person. You’ll find that you are much happier when you stop comparing yourself to others.