Carl Richards is a Certified Financial Planner™ and creator of the Sketch Guy column, appearing weekly in The New York Times since 2010. The following article is reproduced with permission from his weekly newsletter and his website can be found here.
Greetings, Carl here.
We’re a competitive bunch. It sometimes seems like the only way we know to measure how we’re doing is by comparing ourselves to others.
In fact, I can’t tell you how often, at the end of a meeting with clients, one of them would lean over quietly and whisper to me, “Hey, Carl, how are we doing compared to your other clients?”
This is pointless behavior (since how other people are doing has nothing to do with how you are doing), but it’s what we do.
In fact, there was this crazy experiment conducted at Harvard. Researchers gave participants two options:
- Option 1: Earn $50,000 per year while everyone else earns $25,000.
- Option 2: Earn $100,000 per year while everyone else earns $200,000.
Now let me be super clear, people were told to assume that everything else (like the economy, the value of the dollar, etc.) stayed equal. So more money meant the option of buying nicer things.
Obviously, you’d pick Option 2, right? Of course, we would want more money, independent of what everyone else had.
But it turns out, half of the people in the study didn’t want more money. They just wanted to have more than everybody else—even if it meant having less overall.
What do you make of that?
Of course, the only solution (and I say this so often it sounds like a broken record) is to get clear to ourselves about what the money’s for.
Granted, that’s easier said than done.
But one way to do it is, every time you spend money, just ask yourself how doing so made you feel.
- Did that bring me the joy I had expected?
- Did it make me happier?
- Did it make my life better?
- Would I do it again?
Don’t use this as another opportunity to beat yourself up for bad behavior. Just notice. You can even keep a little notebook called Money Experiments. Spend money, notice how you feel, write it down. And then, every once in a while, go back and read through the notebook and see what you learn.
That’s one way you can get a sense of how you’re doing financially. Comparing yourself to someone else is not.
-Carl
P.S. As always, if you want to use this week’s sketch, you can buy it here.
