Comparing yourself to others can be extremely harmful to your personal finances. Seeing your neighbour pulling up to their house in a swanky new car can cause envy to bubble up in a lot of people. If you wish to practice good personal finance and have a healthy money mindset, it’s a good idea to nip these thoughts in the bud. Envy can drive people to waste half of their life savings on useless things they don’t really need.
Why do we compare ourselves to others?
When we compare ourselves to people, we tend to subconsciously compare ourselves to people who have more in common with us. For example, the average person would tend to compare themselves to a neighbour or work colleague before comparing themselves to a head of state or monarch.
We tend to do this because these comparisons seem more realistic and fairer.
The closer your proximity (or perceived proximity) is, the more you tend to compare yourself to the person.
Social media has warped this to some extent. It’s given us access to other people’s lives that we didn’t have before. This results in a greater feeling of proximity and therefore, more comparing.
However, whether it be on social media or in real life, people tend to put their best foot forward. The image people show to others is often very particularly crafted to appear a certain way. It’s not an accurate representation of who they really are.
Types of comparisons
In Social Comparison Theory, there are two types of comparisons:
- Upward comparisons
- Downward comparisons
An upward comparison is when you compare yourself to somebody who you perceive as above you. This could be a person who has more money than you or a better job than you. Upward comparisons can be healthy when they’re used as a catalyst to encourage you to improve your personal situation. They can become negative when they cause you to you lose motivation and feel stuck.
A downward comparison is when you compare yourself to somebody who you perceive as below you. This could be a person who is reckless and idiotic with their money. Downward comparisons can be healthy when they are used to stay on track by avoiding foolish actions. They can become negative when you become arrogant and complacent due to feeling superior to others.
What can we do to stop comparing ourselves to other people?
The most common issue people have with comparisons in personal finance is negative upward comparisons. The car example I mentioned at the start of this post is a great example of that.
When you start to compare yourself to somebody else, ask yourself why you think it is a fair comparison.
Keep in mind that external factors like luck play a massive role in personal finance success. Where you’re born, when you’re born, your ethnicity, your gender, your sexual orientation, and a million other things could impact your position in life.
Very often, you will find that the comparison was not as fair as you originally thought. You’ll often see that you’re comparing somebody’s best attributes that are shown to you in an unrealistic way. If the comparison is unfair, then feeling bad about it doesn’t make much sense.
If the upward comparison does seem fair and you feel sad about it instead of using it in a healthy way (as a roadmap to improve), it most likely stems from negative emotions within yourself. You should try to find a way to let go of these negative emotions if possible.