Before the advent of social media, if you lived in a small town, your comparison set was rather limited. The richest person you’d know would be a doctor down the street. Apart from a select few, you’d live similar lives in similar sized homes as your neighbors. You’d drive the same kind of cars, shop at the same stores and go to the same schools. Income disparities would be small and you won’t be trying to keep up with each other. You’d live more joyful lives.
But with social media, your comparison set is now the world and suddenly you feel inadequate. Because what do people post on social media? The curated 0.1% highlights of their lives. Nobody posts about the remaining 99.9% reality.
But this feeling of inadequacy can end up making you spend money you don’t have. This is due to the deeply human tendency at trying to keep up with the Joneses and the 300 PhDs sitting behind that social media algorithm know that. They are in the business of making you feel inadequate so other businesses on that platform can sell you stuff you don’t need.
We also have a flawed perception of wealth because our brains like to take shortcuts. Drive through a fancy neighborhood with driveways adorned with luxury cars and we automatically assume that everyone there is rich. What we don’t know is those cars are all leased, homes are mortgaged to the hilt and many are living paycheck to paycheck just to finance it all.
So the question becomes, why did they have to do that? Why did they have to drive 200,000 dollar cars when they are on the verge of financial ruin if one thing goes wrong in their lives?
It is because of that same feeling of inadequacy within themselves. They feel the need to get the adulation of other people. Hey look at me, I am a big deal.
But let me tell you a secret. Making other people jealous does not make them love you. It makes them despise you.
So instead of looking up to them, we should feel embarrassed for them. Because they are making a psychiatric admission publicly that they feel unfulfilled inside and are dependent on the adulation of others.
You want to drive a nice car, fine. You don’t need a Lamborghini. You are just doing that to show off. You want a nice home, fine. You don’t need a block of a home.
People who are truly wealthy and are psychiatrically healthy don’t need to show off. They know the true purpose of wealth.
So don’t be jealous of people who have X, Y, and Z. You don’t really know what they truly own.
One of the most important traits of becoming and remaining wealthy is being good at playing both offence and defense. Lots of sports players, movie stars and people who win the lottery play a great offence.
They made a lot of money so why do they end up broke? Because they play a lousy defense. They spend like crazy.
Thomas Stanley in his book The Millionaire Next Door describes who the truly wealthy in America are. They are your neighbors leading unassuming lives. You won’t see them flaunt their wealth. They live far below their means and invest a good portion of their income into savings and investments.
Because wealth is what you don’t see. They are in bank and brokerage accounts and in 401(k)s. Debt is what everyone sees – big houses, luxury cars and social media pictures of expensive travels.
Wealth is simply the difference between what you make and what you spend so the secret sauce to building wealth over time is avoiding lifestyle creep as your income rises. This is one of the reasons so many lottery winners go broke. Their lifestyle grows exponentially larger than their pile of money. It is also one of the main reasons so many professional athletes run into money problems. And it is all done to buy things they don’t need with money they don’t have to impress people they don’t like.
But you can vastly improve your personal and financial lives the moment you decide to withdraw from the race of keeping up with the Joneses. Spend money on things that matter to you and not on things to impress others. This is also a great way to filter out people from your lives who are only in it because you appear rich.
So ignore peer pressure, delay gratification and say no to lifestyle inflation while you let your net worth silently compound. That is the secret to a happy life.
Thank you for your time.
Cover image credit – Harrison Tincher, Pexels