We live in relative wealth
We live in the wealthiest country in the world, at the wealthiest time in history. The average middle-class person in the US today probably has a cell phone; a car; a TV with hundreds of channels; and a job that doesn’t require much physical exertion, leaving plenty of energy for hobbies, reading, sports, or whatever she wants to do. You’re going to get to enjoy a standard of living in your life that, throughout most of human history, has never been available even to royalty or the super-rich. Still, many middle-class and even upper-middle-class people feel unhappy. Two of the main reasons psychologists and economists give for this strange condition are adaptation and social comparison.
US residents are sixth in average purchasing power, surpassed only by Qatar, Luxembourg, Singapore, Norway, Brunei, and the United Arab Emirates.
Adaptation and Social Comparison
We discussed adaptation earlier, when we talked about “habituation.” That’s when the initial excitement of something wears off, no matter how great it seemed at first. Adaption in this context is similar; it means that no matter how fortunate you are to be able to enjoy a high standard of living, eventually you’ll just get used to the good life, take it for granted, and maybe even become disappointed because you don’t have more.
“Social comparison,” on the other hand, is the idea that we don’t see our lives in absolute terms but rather relative to the lives of our friends. Social comparison is dangerous because it can lead to unhappiness, but perhaps more worrisome is that you might be tempted to spend emotionally in an attempt to keep up with others or just to show your friends you have money.
If you win this spending game, you’ll lose the financial war.
Don’t spend to keep up
When you spend money to keep up with friends or peers, you aren’t really able to enjoy the things you’re spending your money on. That’s because you aren’t buying these things because you truly want them. You’re getting them to show your social circle that you can afford whatever they have.
Chances are, if you’re spending to keep up with your friends, that pressure is all in your head. If you have true friends, and we assume you do, they know not everyone has the same amount of money. The last thing a real friend wants is for you to go broke trying to impress them.
On the other hand, if your friends would actually think less of you because you didn’t have as much money as they have, then maybe you deserve better people in your life anyway.