Buzz
When it’s time to whip our finances into shape, we often look to others to make sure we’re on the right track. Comparing your situation to someone else’s can give an idea of what yours should look like, sure. But as writer Carl Richards reminds us, this can backfire, too.
Richards uses an example of his workout routine. He works out in a group for the accountability, but he made the mistake of tailoring his exercise goals to the standards of others, rather than his own limitations. Your finances can work the same way. I spend too much money on restaurants, for example, and I’ll often justify this by thinking, “it’s fine, my friends go out way more than I do.” But my friends have different goals and priorities. It doesn’t make much sense to use their habits as my measuring stick.
Richards explains:
So many money conversations circle around the often unspoken reality that we’re locked in unhealthy competition with other people. We can’t seem to help ourselves, even though
our neighbor’s business isn’t our business.
So we end up using a measuring stick we
think
matters but that actually has nothing to do with our goals.
While healthy accountability is beneficial, it's crucial to recognize when it becomes counterproductive. For example, monitoring your monthly expenses is an excellent way to stay accountable. However, the objective is to concentrate on your own spending habits, not on your friend's recent purchase of a new car.
Consider another instance: determining how much to save for retirement. In the beginning, I contributed only the minimum required (my employer's match, and not even the full amount) and spent the remainder of my income recklessly. Instead of understanding that the earlier I began saving, the better, I thought, 'No one else I know is saving for retirement, so I'm doing pretty well.' But what does my situation have to do with theirs? It makes more sense to base my goals on my own income, age, and future retirement plans.
Certainly, looking to others can provide a general idea of what we should be doing. Similar to financial rules of thumb, this can give you an idea of what your spending should look like. But the point is, personal finance advice is, well, personal. Comparing yourself to others (or even to a rule of thumb) is helpful, but budget according to your own priorities, numbers, and long-term goals.
Photo by Rocky Lubbers.
