About 20 per cent of On Money survey respondents say they compare themselves to others financially all the time.sasirin pamai/iStockPhoto / Getty Images
In my last newsletter, I asked readers if they compare how their own personal finances stack up against others. Hundreds of you weighed in – either through our survey or over e-mail – and the short of it is: You care, a lot.
More than 70 per cent of On Money readers who responded to our newsletter poll said they compare how they stack up against others financially either all the time (about 20 per cent) or sometimes (52.5 per cent).
Success in investment performance was more important to you than your total savings, salary, buying and paying off a home, quality and number of holidays, and nearly every other benchmark.
What was perhaps at first surprising was that the vast majority of you (78 per cent) felt either happy or inspired when comparing yourself financially to others – both positive adjectives in my book. And yet, many left comments cautioning others against it.
Which got me thinking: Is there a healthy way to compare how we stack up against others financially?
“We all have something neurologically called mirror neurons,” said Kelley Keehn, a financial educator and CEO of Money Wise Institute, which creates training resources. “That gets us very excited to see what other humans are doing.”
The problem is how we verify that information and use it.
Ms. Keehn remembers the panicked reactions to a big bank survey released earlier this year that suggested people needed $1.7-million to retire. “People were like, “Oh my god, no!,” she said.
The survey triggered a wave of reactions, with experts pointing out that the number varies from one individual to another and that most people manage to retire well on far less than that.
“Someone with a paid-off home, a workplace pension and modest expenses will have very different retirement needs than someone renting without a pension,” Ms. Keehn said.
“The danger with financial comparison isn’t always envy. Sometimes it’s hopelessness. When the goalposts seem impossibly far away, people stop playing.”
But there can be a good way to approach financial comparison.
For example, rather than asking whether you’re on par or ahead of others, ask whether you’re ahead of where you were six or 12 months ago. “Have you reduced debt? Started an emergency fund? Increased your savings,” Ms. Keehn said. “Your financial progress matters far more than your financial ranking.”
And peer pressure itself isn’t always bad either.
Take recycling programs. When they were first introduced, incentives and encouragement did little to persuade people to participate. Until they saw their neighbours putting out those bright blue bins, that is.
“They felt compelled to do it,” Ms. Keehn said.
Even envy “gets a bad rap,” she told me. “It can actually tell us something useful about ourselves. If someone’s financial success triggers jealousy, get curious about why. What are you really longing for? Is it freedom? Security? More time with your family? The ability to leave a job you don’t love?”
Use that feeling as a clue to what matters to you, she said, then create a goal that reflects your own values. “We don’t need to eliminate financial comparison. We just need to make sure it’s moving us forward rather than making us feel inadequate.”
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