How do you compare?

Comparison is a killer. Occasionally, someone will ask me how they financially compare to others in their field or demographic. They want to know if they're wealthier than their peers, and it's usually an attorney. At our firm, we say there are no good plans or bad plans, just your plan. Theodore Roosevelt said, "Comparison is the thief of joy." You'll never be happy if you regularly compare yourself to friends, family, or neighbors.

Trying to keep up with the Joneses is the fastest way to the poor house. In my neighborhood, there has been a recent outbreak of Range Rovers. They're everywhere, and it's the car to own, and prices can range from $100,000 to more than $300,000. A few years ago, it was Tesla, and before that, BMW. Buying a luxury car every few years can drain your bank account quickly.

Financial magazines write articles about how much money you should have by a certain age. For example, Ally suggests you should have three times your household income by age 40.[1] If you earn $100,000, your retirement assets should be $300,000, but what if you only have $200,000? What do you do? What if your account balance is $400,000? Can you retire? Rules of thumb or suggested amounts are meaningless because they do not apply to your situation.

Another trap is to follow financial influencers because they present their best image. In most cases, they probably don't own the home, car, boat, or plane where they're filming because they are trying to sell a lifestyle or product. You are funding their lifestyle and making them rich.

Comparison can force you to make poor investment decisions, increase debt, or spend wildly. Did you buy pet rocks, lava lamps, beanie babies, or NFTs? It was a short-term gain, long-term pain. Spending money on fads or trends can distract you from investing wisely.

A college acquaintance sold a business for several million dollars, which greatly bothered one of my friends, who was obsessed with money. My friend's obsession with our classmate's windfall was stealing his joy.

Don't let comparison ruin your golden years. I read a story about two retirees discussing investments when one asked the other, "Did your investments outperform the market during your working years?" The other replied, "I don't know, nor do I care because I'm retired, living at the beach."

Rather than worrying about your neighbor's wealth, focus on your own. Here are a few tips to help you avoid comparison.

• Budget. Your budget can help create a successful saving and spending plan based on your numbers.
• Plan. A financial plan can guide you toward your most important goals, like paying for college or retirement.
• Invest. Investing today can help you tomorrow. Invest in 401(k) plans, IRAs, and brokerage accounts.
• Save. Contribute regularly to money market funds or savings accounts. An emergency fund can prevent some financial disasters.
• Give. Charitable giving and helping others is a common cure for comparison.

Comparison reminds me of the classic scene from Caddyshack between Judge Smails and Ty Webb.

Judge Smails:
Ty, what did you shoot today?

Ty Webb:
Oh, Judge, I don't keep score.

Judge Smails:
Then how do you measure yourself with other golfers?

Ty Webb:
By height.

August 12, 2023

Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level.

Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog; past performance does not guarantee future performance. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren't suitable for every investor. Prices and yields are for today only and are subject to change without notice.