There’s a Harvard University experiment[i] in which participants were asked which they’d prefer:
a) a job where they earned $50,000 a year while others around them earned only $25,000 a year
or
b) a job where they earned $100,000 a year, while others earned $200,000 a year.
The survey respondents were basically asked to choose between a scenario where they were personally endowed with significantly more than all others in their group (despite earning less in absolute terms), or one where they earned more (in absolute terms) but less than everyone else in relative terms.
The result? Most respondents indicated they’d prefer to earn $50,000, rather than $100,000, if it meant the lesser amount put them ahead of their peers.
The fact that that so many participants chose less money in absolute terms seems irrational – at least in financial terms. But it points to the fact that – even money decisions that seem straightforward – can be affected by other, more intangible factors, like social comparison.
Relative wealth (or lack of it) can affect how people feel about themselves in relation to others – but relying on a dollar figure to feel respected, admired and prosperous can be a slippery slope.
Personal finance isn’t just about numbers.
For one person, a million dollars may easily surpass their financial needs and aspirations, while for another, many millions may still not feel like enough.
Comparison is unlikely to help you enjoy your money, whatever the amount.
Remember, we’re all running our own race.
Don’t waste time comparing yourself with others. Define success on your own terms and stay focused on what matters most to you.
If you’re looking for financial advice that aligns with your values, call Align Financial on (02) 9913 9995.
[i] ‘Is more always better? A survey on positional concerns’ Journal of Economic Behaviour & Organization, Volume 37, Issue 3, 30 November 1998, pages 373-383: https://www.sciencedirect.com/science/article/pii/S0167268198000894
