HYDERABAD: If you are a do-it-yourself financial planner, here’s a question you must find an answer to first: When do you feel rich?
Would earning Rs 1-2 crore make you feel wealthy? Ideally, that should be enough for retirement, after adjusting for inflation, but in reality that hard-earned income may not translate into happiness if you are stuck in the ‘social comparison’ conundrum.
You may start off assuming you’d be more than happy if you have enough money to take care of your basic needs and a tiny bit more. But social comparison trap could crash the party. Particularly, if you are someone whose satisfaction levels are higher only when you feel better off than the person or persons you often compare or compete with. There’s enough research globally to prove the point that often individuals appear happier when their income is larger in comparison with the income of the people they compare with.
However, financial coaches advise that it’s an unhealthy benchmark. One should focus on not how much money one has or needs, but what he or she wants to do with it, in order to keep oneself happy. In short, it’s the good spending decisions that can yield higher, or an eternal satisfaction.
If you are constantly comparing with others, the risk of unknowingly getting into the spending-beyond-your-limits syndrome, are inevitable and before you know, dissatisfaction creeps in. Chances are also that your goals of wealth accumulation will keep rising endlessly, though if it all leads to satisfaction remains unclear. Eventually, you end up with increased stressing about rising money needs.
Social comparisons comprise downward or upward comparisons. It means, one ends up drawing parallels with others who are doing less well or better than themselves. Instead, financial advisors suggest, one must compare their current position to where he or she was financially and professionally some years ago.
In the realm of money, one must realise that one would be better off doing less observation of peers, as well as asking questions about self-spending desires and needs, in order to feel good about your finances.
Not getting into the comparison trap will not only reduce financial stress, but also limits financial goals from changing constantly. What’s also needed is having complete awareness of what and how much money we need and why. This definition of one’s financial goals is critical in reaching the ultimate retirement goals.
All of us, irrespective of how we feel about our financial position, have common financial priorities — to save enough for retirement and protect accumulated wealth.
But what’s also important is to remind oneself every now and then that retirement isn’t all about money. Because money is only a means of accomplishing the many things you have been dreaming about.