Don’t Set Financial Goals Based on Comparisons With Others
Comparing yourself to others is generally not a good idea. You forget to focus on your goals, you become jealous – you may even start feeling ungrateful for what you have. But there is another reason to avoid this habit: you may be comparing yourself to a false standard.
Financial writer Carl Richards explains that we often compare ourselves to others without knowing the details of their situation. This can cloud our judgment and lead to poor decisions. He’s writing:
It’s hard not to compare yourself to others on the basis of perceived spending or consumption, because this is often the only criterion available. Psychologists call this social comparison theory. When objective measurement is not possible, we compare ourselves to what we see around us … But our quest for confirmation comes with some serious blind spots. Income depends on many other factors, so both the amount of dollars earned and how they appear to be spent make no sense to compare. Your neighbor may drive an older car to retire early. Your cousin may be making $ 100,000 a year compared to your $ 50,000, but that involves a two-hour commute and weekend work. We just don’t know.
When you make assumptions, you can build your own goals and habits based on those assumptions. For example, your thrifty neighbor drives a cheap car, so you don’t like frugality because you think he or she is poor.
Bottom line: Set goals based on your own situation and your own numbers. Sometimes a little comparison can be helpful, but if you go too far, you may lose sight of what works for you. Check out the full story for more details.
Comparison with others can overshadow our own goals | New York Times