Wednesday, Sept 8th

One of the traps that we all fall into is comparing ourselves to others. We’ve all heard the saying “keeping up with the Joneses”. We’ve probably seen examples of how someone bought something and then someone else bought something a little bit bigger, or a little bit better. Apparently there are 2 NFL owners building yachts right now and both are trying to one up the other.

The temptation for many people is to try to keep up with the Joneses. In many instances, the Joneses are broke. I have to remind my kids all the time that the car someone drives or the house they live in isn’t always a good indication of how much money they have. It certainly isn’t an indicator of how happy they are. But, we still look at what others have and make assumptions about their net worth and their happiness.

When I was in my mid-20’s, I had a good friend who went to work as a pharmacist. Among my core group of friends, he as the one who made the most money. I remember being at a dinner with a bunch of guys and a few friends were teasing him about him “having it made.” One of the guys kept asking him how much money he made. Eventually he relented and told us that he made $48,000 per year. He didn’t tell us that to brag, he told us that to shut everyone up.

$48,000 per year! Holy cow! How could he possibly spend everything he was making? At the time, I was about 2 years out of college and was making about $18,000 per year at my first real job. Yep, I was envious.

A few years later, I heard of another buddy of mine who bought a new house in a new neighborhood. The rumor was that he bought a $175,000 house. I could not believe it! I looked it up on the tax assessors website to confirm. How could he possibly afford to spend that much on a house? I had just bought my very first house for $71,000. It was just a 1 story ranch house off Forest Hill and again, I was envious.

At every stage in life, there is always something to compare. Fancy cars, lake houses, boats, and now I have a few friends who have private jets. It’s wealth that is beyond my comprehension. But why do I even need to comprehend it?

The truth is, I don’t. It doesn’t impact me in any way.

One of the questions that comes up regularly from people I talk with is…”how am I doing?” Sometimes people are asking the question because they sincerely want to know if they are going to be ok.  This is an easy question for me to answer. I’ve done the work and the analysis and I have stress tested their plan.

But sometimes, this is not what they really want to know. Here’s what they are really asking…

  • How am I doing in comparison with your other clients?
  • Do I have more or less money than your other clients?
  • How does my return compare to your other clients?

Why would someone else’s finances have any impact on your happiness in retirement? It shouldn’t. Chances are, there are a lot of folks who have more money than you. However, there are also a bunch of folks who have less than you.

Remember my buddy who had the $175,000 house that I was jealous of? I didn’t know it back then, but I later learned that I had some friends who were envious of the $71,000 house that I had. In their mind, I was their rich friend.

What’s the harm in comparing returns with others? Sure, your brother in law said he got a 12% return and you only got a 7% return? Does it matter? You can’t compare your returns because there is almost zero chance you are taking the same amount of risk. I would also tell you that there is a 50% chance he’s telling you the truth.

Social media has proven to be a breeding ground for envy, and if you’re not careful, you’ll find yourself being less thankful for what you have. My encouragement to you is to avoid comparing your situation to other people…it’s a trap. There is absolutely nothing to gain and many times people who get caught up in this trap wind up making poor decisions.

We all have a lot to be thankful for and I am thankful for the trust you’ve placed in our firm.