It’s human nature for us to compare ourselves with others when it comes to all aspects of life, from physical appearance to athletic ability to wealth. It starts when we’re just kids and continues for the rest of our lives — unless we are intentional about avoiding it.
Comparing ourselves to others is damaging to our self-esteem. We all have different backgrounds, opportunities, circumstances and challenges.
Social media has only escalated the comparison game. When people brag on social media that they became millionaires overnight or that their significant other whisked them away to a tropical island for an extravagant vacation, it’s easy to feel “less than.” But in most cases, those stories of unbelievable success and luck are leaving out some of the less-rosy details. And sometimes you have to account for the “exaggeration factor.”
Social media platforms are full of fake posts, often presenting idealized versions of people’s lives. This can lead individuals to compare themselves to others and feel inadequate if they perceive themselves as not measuring up. This constant comparison can negatively affect self-esteem and lead to insecurity and self-doubt.
How your success compares to others’ isn’t a reliable benchmark
Measuring your own success to someone else’s can be especially risky when it comes to making financial decisions. Studies have shown that trying to keep up with the proverbial Joneses can lead to costly financial mistakes.
In one study, Keith Payne, a professor of psychology at the University of North Carolina at Chapel Hill, found that economic inequality increases risk taking, which in turn can cause people to make poor financial decisions. The study found that people feel the need to risk more when they are aware that others have more than they do.
That comparison not only robs us of joy; it also can cause heightened stress related to money. And money stress often leads to financial decisions that are based on emotion instead of logic. For example, if you start thinking that so-and-so has more money saved up and you really need to catch up, you’re more likely to make emotional and impulsive investing decisions that don’t have positive outcomes. It’s a vicious cycle.
When you achieve a personal level of success, it’s exciting and uplifting. However, the moment you hear or read that someone else has achieved even more, all of a sudden that joy you felt disappears.
Benchmarking success against indexes isn’t a good idea, either
It’s also not a good idea to benchmark your success against indexes, such as the S&P 500. A lot of investors compare their Investments, and ultimately their financial plans, to the performance of this index of 500 companies.
Did you know that the probability of beating the S&P for 15 consecutive years is 1 in 2.3 million?
The problem with mainstream benchmarking analysis is that it always focuses on the trailing one-year performance. The truth is that even if you buy an index, you will still underperform it over time. Over the past 30 years, the S&P 500 Index has risen by 1,987 percent versus the ETFs’ gain of 1,916 percent. The difference is due to the ETFs’ operating fees, which the index does not have.
Investing is a long-term game. Reacting to fluctuations in the markets — and to what other investors are doing — will not result in an optimum outcome. If you can consistently achieve slightly better than average returns each year over a 10- to 15-year period, then cumulatively over the full period, you are likely to do better than roughly 80 percent or more of your peers.
Set goals that will enable you to live your best possible life, and ignore everything else.
Breathing life into your goals
I encourage you to make a conscious effort to stop comparing yourself to others — and to indexes and other benchmarks. At FORM Wealth Advisors, our goal as we work with you is to turn your focus away from industry benchmarks like the S&P 500. We want you to create your own way of measuring financial success based on your unique situation, goals and dreams. We partner with you and help you breathe life into your goals so you can create, and follow, a personal benchmark for your own life.
Some of those goals are practical, such as paying off high-interest credit cards, building up an emergency fund, maxing out your 401(k), paying off student loans and paying off your home. You might be surprised to learn that some high-net-worth individuals have a hard time accomplishing some of these basic goals, while people with much less income reach these goals simply because they realize how important they are to financial independence. As a result, they make those goals their focus.
While you are striving toward those types of goals, we want you to be thinking about what you want your life to look like in the future. Dream big! Let your imagination run wild. Have brainstorming sessions with your spouse about what your ideal retirement looks like. And then we will focus on those goals and help you achieve them.
One of the most rewarding parts of my work is guiding our clients through this process of discovery and then building a plan that will help them realize those goals.
To do this, we have to change the focus from external measures to internal measures related to how you want to live out the remaining decades of your life. What does financial Independence in retirement mean to you? How do you want to spend your time with family and friends once you retire? Where do you and your spouse want to travel? What types of recreation do you wish to start or continue to pursue? And finally, what is the legacy and impact you wish to leave behind for your loved ones and the charities that are important to you?
The way you answer those questions form the foundation for how to measure success. Establishing, and monitoring, that benchmark can lead you to live your best life possible, and we are here to help you do just that.
