A few days ago an acquaintance asked me how much I made. That question instantly brought my guard up and I looked at her askew and deflected the question with some clever remark. I will never find out if it was an innocent query not steeped in something a little bit more insidious like office politics but it brought to light the fact that this culture thrives in competition and comparison.
There are many reasons why we make the financial decisions that we make but one of them is because of comparison. We look to our left and to our right and see that everyone around us has the latest gadget and we decide that we need to get one too. A friend gets an LCD plasma? You get one too. Only bigger. Long time coworkers start buying houses? Well, you stretch your credit tolerance to keep up, even if that means being house poor for 30 years.
Then now that debt has been accumulated in pursuit of neighbors, debt becomes a very taboo subject because of the fear and shame that comes from comparison. So instead of seeking help to address the problem, some just unnecessarily suffer alone not really knowing what to do or whom to contact.
What we need to realize is that we should stop comparing and just focus on our own unique situation and our own goals. There is no sense in comparing so many different sets of circumstances. It is like comparing apples to oranges.
Comparing Earning Power
We talked about how we will need different nest egg numbers for different types of retirement lifestyles but it does not stop people from trying to compare numbers. I recently wrote about how seeing other lanes go faster made me very irrational in my investing and trading strategies. Instead of focusing on my situation, I looked to my left and my right and compared my pace with others. Despite the fact that my portfolio was making money, I chose to ignore that and tried to keep up with the Joneses. End result? My portfolio stalled.
What I had originally would have gotten me to where I wanted to go (in terms of nest egg number) at the pace (11% annual) I had deemed okay yet by being distracted with comparisons, I ended up with a longer uphill battle.
Comparing Never Ends
We can compare ourselves to our richer friends and colleagues but they compare themselves to millionaires. And millionaires wish that they had enough money to become multimillionaires. And those people are not happy because they hear about billionaires. This is insane!
If we were to just focus on our own personal situation and work towards them, we might actually stand a better chance of exceeding our own goals.