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Comparisons are a Roadblock to Financial Freedom

Written by: Corey Janoff

Comparisons might lead to the demise of humans.  We are constantly benchmarking ourselves against each other and it is not healthy.   Don’t believe me?  When was the last time you were at work and took your phone out for a minute to scroll through Instagram and saw a couple you know with a young child looking happy as can be on a tropical vacation and thought to yourself, “They look like they are having such a good time!  Their kid must be well behaved.  Why can’t I go on a fun vacation like that with my family?  Instead I’m stuck here at work, slaving away…”

What you don’t see in that Instagram post is the plane flight from hell with a toddler to get to said tropical destination.  Or the bags under their sunglass-covered eyes from only getting 4 hours of quality sleep in the last two days.  Or the argument they had in the hotel room after the picture was taken because the husband forgot to pack the second phone charger, even though the wife specifically told him to pack two phone chargers.   All you see is a carefully curated snapshot of a brief moment in time where your friends appear to be happy and having a great time.  From that, you extrapolate that their life is great, and you are left pondering why your life isn’t quite as great as theirs.  Your life might be fantastic, yet you feel like you are missing out on something, rather than being content with what you have.   

You can find plenty of articles and studies about how social media can be terrible for our mental health, including this short one from Time Magazine.   We only see what people choose to share and it doesn’t always paint the entire picture.   What’s crazy is we are completely aware of this, yet we still fall into the trap!  We want our lives to be like our friends’ Instagram lives.  We are all like Wile E. Coyote, chasing a Roadrunner that we are never going to catch.  

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Comparisons can Derail your Finances

When it comes to financial planning, we are all susceptible to falling into the same Instagram-like trap.  You might have a well-structured financial strategy and are on track to achieving your financial goals, and then you get into a casual conversation about investing with one of your colleagues in the breakroom.   Your colleague claims his retirement account grew 18% last year, yet yours only grew by 11%.  He says he is heavy in tech stocks because “that’s where all the growth is,” which leaves you questioning your boring diversified portfolio.   

Another colleague walks in and starts showing you pictures of the new vacation home he just purchased.   You don’t have a vacation home, but after seeing the photos, you start thinking you might want one.  However, you’re not sure if you would be able to afford one.

That afternoon, a colleague who started his career at the same time as you a couple of years ago, proudly informs you that he managed to pay off his student loans completely.  You have been hammering away at your loans pretty aggressively, but still have about three years to go until they will be paid off.  

After a long day at work, you pull into your driveway and see your next-door neighbor bought a new Tesla.   He offers to let you take it for a spin and starts playfully jabbing you about your 9-year-old Honda.  

Later that evening you are relaxing before bed see an article about the average hourly wage for salaried professionals.  You scroll to find your occupation and learn the average hours worked is 36.7 hours per week.  You work at least 50 hours a week!  Your gross income is above the average reported, but when broken down to dollars per hour, you find out you are underpaid!  Ahhhh, the acrimony!  

You woke up feeling pretty good about your finances.  You go to bed questioning whether or not you are actually on the right track to achieving all your goals.  

It Happens all the Time

We are social creatures.   We want to interact with each other and seek each other for confirmation and approval.  The problem is, we aren’t always honest with each other (or ourselves) and we all have different goals and objectives.  

Your colleague who claims to have realized the 18% return on his investments last year might have lost 18% the year before.  You don’t know what exactly he invested in, when he bought/sold.  Luck, not skill, probably explains 90% of his returns.   You don’t need to compare your investment portfolio to your friend’s, or to some arbitrary index that isn’t an accurate representation of what you are invested in.  It will just put you on a rollercoaster of emotions – happy when yours does better, disappointed when it doesn’t – and will likely lead to you chasing returns.  

What the colleague with the vacation home didn’t tell you is his in-laws passed away and left them with a sizable inheritance, which enabled them to afford the second home.  

Hats off to the one who paid off his student loans in two years.  That takes a lot of effort and discipline.  He also started off with a smaller balance than you, doesn’t have children (you do), lives in a studio apartment in a questionable part of town, and hasn’t saved anything for retirement yet.  Tradeoffs.  

Your neighbor with the Tesla is in debt up to his ears and spends beyond his means.  He might be income affluent and can afford to purchase finer things with his earnings, but he’s not balance sheet affluent (assets minus debts).  How much you earn minus how much you spend equals how much you keep.  How much you keep is what matters most.  

Stop reading news stories before bed.  It’s not healthy and will make it harder for you to fall asleep.  You work hard, earn a nice income, are well-respected by your peers, and are doing just fine.  The world is also safer today than it has ever been in the history of humanity.  We just see more of the bad stuff now with 24/7 news cycles and cameras on everyone’s phone.  

comparisons are a roadblock to financial freedom

Motivation vs. Self-Destruction

There is a fine line between motivation and self-destruction.  I’m a big fan of self-motivation.  You might want to know how you stack up against your peers and use that as motivation to achieve more.  Your buddy is saving 20% of his income for retirement?  You decide you’re going to save 25%.  Your sister is paying an extra $500/month towards her mortgage.   You decide you’re going to double your mortgage payments.  

Keep in mind though, everything comes with a cost.  If going camping instead of taking an annual trip to Europe is all you have to change in your life to increase your retirement savings and double your mortgage payments, then great.  Go for it.  But if doubling your mortgage payments means you stop putting money into your children’s college funds, despite wanting to pay for them to go to college, maybe that isn’t the best move.  If investing an extra 5% for retirement means you quit investing in your relationship and you and your spouse stop going on dates together, what are you really accomplishing?    

Be careful when comparing yourself to others.  It’s easy to get caught running on a hamster wheel attempting to catch up with everything you see.  There is always going to be someone out there who makes more money than you, has a nicer house, drives a nicer car, has more money in a retirement account, gets better investment returns, goes on more extravagant vacations, and is just better at life.  

Stop trying to be that person.  Instead, work on being the best that you can be and be content with that.  Once you can look your friends vacationing on Instagram and say, “Good for them,” and then get back to focusing on you, you’ll be on the right track.  A giant weight will be lifted off your back and you can move towards financial freedom, however you may define it.  

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