There’s evidence to suggest that social comparisons explain more of the variation in financial wellbeing than a person’s actual income level, age, gender or education. So to improve our financial wellbeing, it’s important we get our social comparisons right!
In a blog post in March 2018, John Hewison, our Founder and Chairman wrote about the dangers of making investment performance comparisons. In todays post, I want to concentrate on some dangers associated with making the wrong type of social comparisons and provide three useful tips which can be employed to redefine who we’re comparing ourselves to. Let’s face it, we’ve all done it before; our natural urge to always compare ourselves to others, it’s us vs them. The goal is to reduce financial anxiety and possibly even improve our financial well-being, so let's get started.
I’m sure you’ve heard the phrase “keeping up with the Joneses”, but who are the “Joneses” we’re comparing ourselves to? Often, we’re comparing ourselves “upward” to someone who earns more, has more money or a neighbour with a bigger home. It might be a friend or someone we follow on social media (who we‘ve never actually met and know nothing about) whose lifestyle appears to be more exciting than our own, full of regular vacations and shopping sprees.
For some, upward comparisons might serve as a motivator to strive for more, but for many, this can also be a source of negative emotions towards ourselves. Take a moment to think about the last time you compared yourself to someone else. I bet you viewed this person as being “better off” which left you feeling negative financial emotions about yourself.
Research shows that a person’s perception of themselves relative to others has a greater impact on their happiness than their actual position. So if we’re always comparing ourselves upward, then it’s unlikely we’re going to be truly proud of our successes or fully appreciate our past achievements and personal growth.
When we stop to think about it, it’s easy to see that by always looking up to those who have more, many of us are actively making ourselves feel bad about our own financial circumstances.
As a society, we’re all susceptible to making social comparisons. Even the wealthy and those on high incomes are subject to self-inflicted financial anxiety because of always looking up to those who appear to have more.
1. Start making downward social comparisons:
In other words, compare your current financial situation to someone who has less than you or is earlier on in their own financial journey than you are. This should not only serve as a reminder as to how much you’ve achieved (rather than always wanting more) but could also inspire future growth.
2. Compare your current position to where you were at a previous point in time:
Regular self-reflection should put financial achievements in perspective by creating a positive connection between our actions (hard work, sacrifice etc.) and our accomplishments.
3. Find an appropriate financial role model:
Drawing parallels between our current position and where a financial role model once stood on their own journey can give us confidence that we’re on the right path towards the achievement of our own goals and objectives.
Redefining who we compare ourselves to is a great way to kick start 2019. Discover how you could improve your financial well-being by partnering with experienced advisers that provide people with the confidence and freedom to achieve THEIR goals and dreams and not those of others. Reach out here >>
Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email firstname.lastname@example.org or visit www.hewison.com.au
Please note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.