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How To Be Richer Than Your Friends


Last week, just before Thanksgiving, I sent an article to people on my email list that you won’t find on the blog.

I was psyched to see how many of you wrote back saying you enjoyed the advice.

If you only saw the subject line or skimmed the email, you thought “oh it’s Thanksgiving and this guy is thanking me for reading his blog and reminding me to be thankful, blah blah blah.”

But if you actually read the email, hopefully you saw that there was a really useful nugget of wisdom contained within. I shared one simple technique that researchers have found will improve your mood, health, and finances (and it takes less than 10 minutes a week).

If you want that tip, you’ll have to subscribe. But I will tell you that last week’s email was about gratitude, and how grateful people are happier.

I shared that email (and the actionable advice) because it relates to the thing I find most interesting about personal finance—our individual relationships with money.

WE ALL COMPARE

What I’m about to tell you used to really piss me off.

Two of the most searched for and commented-on articles on this blog are:

I wrote these posts because readers are always telling me they want benchmarks. We all want to know “how we’re doing” compared to national averages or, more importantly, compared to other people our age.

So I gave them what they wanted. And then I regretted it.

If you read some of the comments on the two posts above, they get nasty. So nasty, in fact, that I closed them down on the 401k post. Here’s the start of one string:

Josh: I currently contract overseas, I have about 105K in saving and 20K in low risk investments. My 2001 car has been paid off and I have no debt. For being 25 with only some college and prior military I think I am on the right track.

Blake: lol! you are all liars… and i have 84 million under my mattress. you can’t even spell ‘savings’ correctly.

This degrades quickly into an immature barb-fest with more comments spent mocking other readers’ spelling than offering intelligent insights. In hindsight, I should’ve deleted more of them. But the pattern is interesting.

Many readers comment that they earn six figures at an early age (24, 25, 26 etc.) and already have a sizable amount saved. Many of them then ask others to validate that they’re doing well. Almost immediately, others earning far less want to shout out “yeah, Asshole, you’re doing fine.” Many people don’t put it so nicely.

What does this tell us?

  • We love to compare ourselves to one another.
  • We love to discover that we’re better off than other people.
  • We love to hate people who are better off than we are.

So I used to read comments like this and get angry. I got pissed that people seemed to gloat about how much money they made and then I got pissed that people wrote such nasty responses (hiding behind anonymity of course).

I still don’t condone people gloating about their riches or trashing others for their financial situation, and I’m more quick to delete comments that are mean than I used to be. But I’m starting to understand where these comments come from.

We all want to feel like we’re better off than our friends.

For some of us, that means earning more money, or having a higher net worth.

For others, it means believing that the decision to be a math teacher instead of a hedge fund manager is more honorable and enriching.

And there is science behind this. When we reflect on ways that we’re better off than other people, we’re happy. But when we dwell on ways that we’re less fortunate than others, we get jealous, depressed, angry, etc.

As an example, research shows that money only makes you happy if you’re richer than your neighbors. People who have high incomes compared to others in their neighborhood are happier whereas people who earn less than their neighbors are less happy.

Knowing this, it seems we have two choices.

  1. Actually get richer than other people (or at least focus on the ways we are “richer” than other people).
  2. Stop comparing.

The latter choice is not new advice. It’s in the Ten Commandments! Don’t covet your neighbor’s house. But we’re so bad at it. Just read those comments.

If you truly want to be richer than your friends, stop comparing yourself to them.

But because that’s not easy to do, here are some other things you can do as well.

FOCUS ON WHAT YOU HAVE, NOT WHAT YOU DON’T

Let’s talk about the Occupy Movement.

I support it.

In the United States (and Europe too), the Middle Class is disappearing. I believe this presents a grave threat to our economic future. Without what economist Robert Reich calls the “basic bargain” in which employers pay their employees enough to purchase the products they produce (and a modest home, car etc.), people don’t spend money. And when people don’t spend money, small businesses can’t grow and create jobs, leaving more people without jobs at all. Wealth stays in the pockets of corporations and the superrich, and the average person gets poorer.

That said, let’s look for a minute at the movement’s motto: “we are the 99%”.

In the United States, you can earn a boatload of money and still be in the 99%. (I’ve heard various stats, but it sounds like the threshold of the 1% is an annual income of somewhere between $350 and $400k a year.) Of course the implied 1% are actually the 0.1% who earn much more than this…millions and billions.

But let’s stop for a moment and put things in perspective.

In 2011, the poverty line in the U.S. is $10,890 for an individual. Not a lot of money. In the U.S., it would be damned hard (impossible?) to survive on that.

But believe it or not, somebody earning $10,890 a year falls within the richest 13.12% of the world according to the Global Rich List.

And, if you make $47,500 a year or more, congratulations, YOU are in the richest 1% on a global scale.

This may not be comforting to the thousands of unemployed and underemployed college graduates. Nor the single mother whose sick child’s medical bills put her in bankruptcy because her job doesn’t have health insurance. Or the seniors on fixed incomes facing rising medical costs and reduced benefits. Nor the small business owner who is frustrated because she pays more federal taxes than corporations including GE and ExxonMobil.

But you—my readers—can use this.

Whatever your current financial challenges, start every day by focusing on what you have, not what you don’t.

You’ll worry less. You’ll spend less. You’ll be happier.

You’ll be in a better position to work towards your financial goals.

ACT, DON’T OBSESS

It’s good to have financial goals.

Money is not inherently evil.

Our desire to earn an honest buck is the oil in our economy’s engine.

Striving to earn more money because you want to be rewarded for your hard work is different than lusting after the car your friend drives. Money—and the quality of life money can buy—is a perfectly acceptable reward for hard work.

So if you want to earn more money, stop comparing yourself to others and stop hating people who have money.

Instead, figure out what one thing you can do to earn more and do it.

  • Example 1: Spend the next three months focusing on high-value activities at work. Create a portfolio of your results. Ask for a raise.
  • Example 2: Take a skill and turn it into a freelance business. Email five people you know who might need your services. Instead of outright selling to them, ask if that “kind of service” would ever be useful and if so, what exactly would they want? Then take their answer and offer to do it for them.
  • Example 3: If you’re unemployed, underemployed or in a truly dead-end job, commit to doing what it takes to change your situation. It’s a brutal world out there, but my readers can beat it. Change cities if you have to. Network like mad. Offer to work for free for a month.

Why is this post titled “how to be richer than your friends?”

Because it got you to read it. We all play the comparison game. It’s human nature. But if you want to be more successful (and happier), turn it off.

Focus on what you have, not what you don’t. Focus on what you need to do to get where you want. Do it.

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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.

Comments

  1. I don’t think it is all bad that people want to compare favorably to their neighbors. I’m sure there is an element of greed, but mostly I think it is insecurity. No matter how many resources you have, you will probably be OK as long as you have more than the average person. There are too many economic uncertainties for the average person to fully account for in their planning, but as long as they are average or better, they can use implicit crowd-sourcing to determine that they are probably on the right track. If they are very far off from the norm, they will want to figure out why.

  2. The link between wealth and happiness is wells studied in sociology. There has been a good deal of research suggesting that someone earning 50K in a neighborhood where the average income is 40K feels more wealthy that somone earing 100K in a neighborhood where the average income is 120K (these numbers are approx. as I don’t remember the exact ones).

    Contrary to what many believe, wealth is a social perception. The 1% are surrounded by other 1%ers, and thus may not feel exessively wealthy. This also prevents them from sympathizing with the needs of the bottom 50%. There is other research that suggests as economic segregation increases, those in power (the wealthy) are less likey to implement leftist policies that assist the poor. It isn’t becayse they are greedy, but they simply don’t have enough interaction with the poor to understand their situtation.

  3. David Weliver says:

    Good additions, you two. Thanks.

  4. I think this was a great article and a wonderful reminder of what really matters. I appreciate you putting yourself out there and commenting on this behavior. We all have done it and none of us ever walk away feeling better afterwards. At the end of the day, it is best to worry about the things that really matter. Life is too short to get consumed with jealousy. Thank you and Happy Holidays!

  5. I was impressed with your regular email right from the start, but my expectations only extended to sound financial advice. Thanks for being bold enough to take it to the next level. As you’ve referred to before, money and its management is an emotional issue. It only makes sense that ultimate solutions are not solely about better employment, risk management, investing, etc. Keep it up!

  6. Thank you for this weeks post! It really helped “reset” my perspective on things. I agree with your stance on the Occupy movement. While some are joining in as followers, like it’s a fad, others are trying to protect the middle class.

    I shared the Money under 30 link on facebook as I feel this weeks post is especially good and timely.

  7. Thank you for your post. I have learned to not compare yourself to others a long time ago when I was a payroll processor. I would get upset at the pay others were receiving. For what? Why? I could not spend it and I certainly did not know exactly what type of expenses they had or if they were happy! We need to make decisions to better our lives–WE DO–NO ONE ELSE….

    Thanks again.

  8. I definitely appreciate your posting about gratitude, which I’ve seen transform my last month! I started writing daily gratitude lists each morning before starting my day (as often as I can at least) in which I take a few minutes to reflect on all that I have to be truly thankful for. It’s amazing how that sets the tone for my day to be most excellent. I used to always be a glass is half full type who was never satisfied with what i had…i frequently compared myself to others and always felt incompetent. since being challenged to write gratitude lists daily i feel like all aspects of my life have improved and will likely continue to improve as i go on. appreciating what you have is so important to feeling fulfilled. i recommend you try it out for yourself!

  9. What a timely article.

    I’m a really open book with friends and family & I recently disclosed how much I make to my friends. It’s not a lot, but then I realized I make more than all of them (they told me how much they make as well).

    Now I feel like I made a major faux pas! Is it weird that now I feel bad?

    • David Weliver says:

      Not weird at all. I think it’s natural to be uncomfortable when you realize you earn more than family or friends, but as long as you don’t brag about it (which I’m assuming you don’t) it shouldn’t change anything.

    • Hannah and David,

      I could not agree more about being an open book when it comes to many aspects in life, finances included. I’ve had to be reminded several times by my boyfriend that just because I am comfortable talking about money, and that is the way I grew up, that doesn’t mean everyone is comfortable talking about it.

      This leads to one of the reasons why I think this article is so great. I think the reason I am so open to talking about finances is because I want to compare, I want to benchmark myself, I want to see if I am on the right track. But when all is said and done if we are all doing our best to be in a financially happy place for ourselves, it shouldn’t matter whether others are doing better or worse than us (unless those doing worse seek us out for advice and such).

      This article offered great perspective for me, and I think if I stop comparing my life to others lives I will be much happier for it.

      Thanks David!

  10. Thanks for the article, I have always felt a need to compare myself to others, and have fought hard to resist the urge. Your article helped me to put in words and logic some of the perspectives which I have always felt but not been able to express.

  11. Hey, Dave!

    Thank you for your encouraging e-mails! When I read the title of your e-mail, I thought it was a challenge to get into a better financial situation; but, I’m glad that it was more intended to be a financial reality check.

    I have to say also that I’m more connected with Money Under 30 as a resource by signing up for these e-mails. They always seem to come at a good time with a great message!

    **Cyrus

  12. Love this post! Thanks for putting things into perspective. Especially important during the holiday season.

  13. alexiskim says:

    Let me first say that I have two very young children to care for (2 and 9 months) so I often just “skim” emails on my phone. This one actually made me stop and read the WHOLE thing! Very well said.

    I learned to stop comparing myself some years ago when all of my friends went on to college and finished their degrees in a much more timely manner than I did. I really beat myself up about it until I realized that although I didn’t finish and get out there working when they did, that I was really happy with my decisions, the things that were happening and with life in general. That was a few years ago.

    To this day I am happy with where I am at. My husband and I just bought a house this year which many thought we could not do and also bought it using only one income instead of two. We could have easily bought a bigger in a better neighborhood house but we are very happy where we are and feel very secure financially. And these feelings don’t come from whether we are worse or better off than others. Thank you so much for this reminder of where true happiness comes from!

  14. In India, if you have a new car it is a status symbol, in the U.S. no one will notice. You can even take the U.S. during the “prosperity of the 50’s,” the good life was living in a 1000 sq ft house with rarely more than one car, a TV, and a microwave. Today if you have the same things you are probably complaining about how rough your life is.

    If you are perfectly content with your salary, but then realize that you coworker who does the same job as you gets paid more, you will probably be unhappy even though nothing changed.

    Happiness is almost all about comparison, we can try to separate the two, but few succeed.

  15. Melissa Martin says:

    I ran across this site looking for advice about health insurance. I am 24 and I have not been covered since I was 19 and was covered under my parents. I just wanted to say thank you for taking your time to create something like this for young people needing advice about their finances, etc. I don’t have a very well paying job, but it is my dream job and it makes me happy. Having something like this website available to us to make the most of what we DO have is a wonderful thing.

  16. Thank you! I get frustrated when people say ‘stop comparing yourself to others’ and don’t offer practical ways to implement this change. I appreciate your suggestion to be grateful for what I have – which is a lot – not only materially, but spiritually.

  17. Great post! Very insightful, and shares alot of good points that I can definitely take with me. Thanks…

  18. Knowing this, it seems we have two choices.
    1. Actually get richer than other people (or at least focus on the ways we are “richer” than other people).
    2. Stop comparing.

    Or, 3. Get poorer friends :D

  19. This really is a great insight! I have been to quite a snobby school with a lot of people showing off how much money their parents have. I learned my lesson there to find real, good friends. Still some of the others have been nice, too, when you got to know them. At some point they didn’t care anymore, if you wear popular expensive brands or have the newest technology at hand. And realising that, I now am not comparing myself anymore with others about money and wealth. I’m happy with my family spending holiday together, so I’m greatful. Thanks again for this great article, it helped me again remember to cherish what I have.

  20. This is great. I’ve never been motivated by any sort of comparative goals — I just want to do the best I can do, regardless of what my peers are doing.

    That said, about a year ago, a roommate and I were talking about finances, and he blurted out angrily, “Well, I’m not paying the rent anymore.” He honestly thought that because I was apparently finally doing alright that he deserved to live rent free. It ended our friendship when he was apparently serious, and he had to move out.

    A life where you compare yourself to others is bad enough, but when you become focused on hating others rather than maximizing your own potential, you’ll just make the world a worse place, and you’ll be miserable.

    So yes, work hard, manage wisely, don’t hate those with more, and learn to be content no matter what.

  21. David, I loved this post. I only recently discovered your site and was flipping through your older posts. I saw this headline, and morbid curiosity made me click the link.

    I read a lot of articles across the Web, and I’m always shocked by how much venom people spew at each other. The dialogue on your site is generally much more civil. You’ve done a good job of encouraging respectful debate, and you should be proud of that. People really open up on this blog. Those who’ve saved well should be proud of themselves, and those who have made mistakes shouldn’t beat themselves up.

    One of the biggest financial lessons I’ve learned is that you have to set your own goals based on the lifestyle you want. Thanks for a great reminder!