It’s human nature to compare ourselves with others.
Over the years I’ve lost count of how many times I’ve been asked:
“David, how am I doing compared with other people like me?”
This used to surprise me. I’d wonder how someone unrelated and with different goals and plans was doing might be interesting to the person I was speaking with. However, I heard it repeated so often I realised something else was going on.
It turns out I was right.
A study by researchers at the University of Warwick and Cardiff University claimed the ranked position of someone’s income (compared with people the same gender, age, level of education, or from the same area) was a better predictor of happiness than the actual amount.
They were trying to understand why people in rich nations have not become happier over the last 40 years, even though economic growth has led to substantial increases in average incomes.
The research concluded being highly paid wasn’t enough to avoid feelings of relative deprivation, people needed to perceive themselves as higher paid than their friends and work colleagues to be satisfied. It turns out even earning £500,000 a year won’t make you happy if your friends all earn £1,000,000 a year.
As part of a larger study, Harvard School of Public Health carried out a survey of their faculty, staff and students who were given two options:
- Earn $50,000 with 2 weeks’ vacation, others earn &25,000 with 1 week vacation
- Earn $100,000 with 4 weeks’ vacation, others earn $200,000 with 8 weeks’ vacation (prices and purchasing power remain constant with Option 1).
Of course, the bright people at Harvard all voted for Option 2.
Nearly half of them chose option 1, they weren’t concerned about earning more money, just more money than everyone else!
Some argue higher taxes on income, wealth, and luxury/status purchases may lessen the impact of relative deprivation and claim this helps explain why high tax Scandinavian countries do well in surveys like the Gallup Global Wellbeing report (they get the top 4 places in Europe).
Hmmm…I can’t see Brits voting for higher taxes though.
Whenever I hear the “how am I doing compared with other people?” question, it’s a red flag and a warning to me that I still have work to do. I know that whether the answer is “better”, “pretty much the same”, or “not so good” it isn’t going to help. Sure, I understand that if the answer is “better” someone might feel happier in that moment, but long-term happiness is far from guaranteed as they’re asking the wrong question.
We’re hard wired to be competitive and conspicuous consumption, our own or other peoples’, is our way of keeping score.
A neighbour’s fancy new car, a work colleague taking another exotic foreign holiday. How can they be spending that kind of money?
The truth is you just don’t know, maybe they’ve got a mortgage and other debts that keep them awake at night, a trust fund, an inheritance, or perhaps they’ll just never be able to afford to retire comfortably.
It’s easy to jump to conclusions, based upon what you see on the surface. What you don’t see are the consequences of the decisions being taken.
The other side of the coin is that comparisons with others might drive someone to work harder for financial success. But if it results in spending that money on things that aren’t aligned with their values and what’s important to them, the pleasure derived from acquiring more ‘stuff’ will be brief.
If this sounds like you then don’t be too hard on yourself, it’s a 21st Century human’s natural state.
If you’re worried about how your pensions and savings measure up, try asking some different questions.
Think of your pensions and savings as like the fuel in your car that is going to take you somewhere, where would you like that to be? When would you like that to happen? Why is that important to you?
Work backwards from there with a financial planner and you’ll find yourself a whole lot happier. If you don’t, you might end up with more pension and savings than all your neighbours and colleagues but still be miserable you didn’t achieve what you wanted to or even discover you had worked years longer than you needed, in order to reach where you wanted to go.
Article by David Hocking