It seems to be human nature to compare ourselves to others. In school, in sports, in politics, everything becomes a competition. Doing well seems to take a back seat to doing better than someone else. I even find when I’m driving that I don’t really mind how long it takes me to get somewhere, as long as I feel I’m getting ahead of other cars.
Money is a little different, because it’s taboo to talk about how much we have, but I sometimes I can’t resist comparing myself to others. It isn’t helpful at all, though. In fact, there are so many things I don’t know about other people’s situation, that comparisons are meaningless. When I’m driving, we all follow the same road, face the same traffic lights and are subject to the same speed limit. But when I try to compare my net worth, savings or spending to others, there are so many other factors.
I worked as a financial advisor for a man in his late thirties who had at least $1.5 million in net worth between his home, his cottage, his cars, his own investment accounts and the accounts I managed. I’m not sure how he got there, but he was far ahead of where I could even hope to be at the same age.
I’ve read stories of people who saving a large proportion of their income. I estimate I was able to save between 30% and 50% of my income, depending on the year. Some people are able to save more than 50%, even as much as 75% of their income. That’s impressive.
I know a young couple who recently had their first child. They both worked for the government, had generous pension benefits and could expect to retire with a full pension at age 55. Add to that the fact that they didn’t need both incomes, and they could probably retire earlier without having to save anything.
I was an advisor for another couple who had a reasonably large investment account, but never saved anything. It turns out they got the capital from their parents (on both sides) and their plan involved inheriting a lot more money to be able to retire. In contrast, I don’t expect to inherit money (I have siblings who need it more).
We tend to notice the most extreme cases: those who start with a lot, those who save a lot, those who earn high returns. But that’s not really helpful. Those people are not on the same road I am, and I can only work with what I have, starting from where I’m at.
Where am I now? Where do I want to be? How do I get there? Am I doing what I need to? Then it doesn’t matter what anyone else is doing. My unique ratio of spending and saving is right for my goals, no one else’s. So it shouldn’t matter if I’m saving more or less than someone else. It shouldn’t matter if I start with more money or less. I’m trying to achieve my own goals with my own resources. And that’s what I try to remind myself when I see someone who starts with more or is saving faster.
How do you combat the tendency to compare? Or do you simply pick comparisons that are motivating for you?