Start with yourself: How much wealth is enough?

What’s the best benchmark in setting expectations for wealth creation and other measures? Some people compare themselves to friends, relatives or colleagues. But that’s the wrong approach. 

The writer Mark Twain once described comparison as “the death of joy”. In fact, one way to go crazy is to constantly compare yourself to others.

Playing the competition game in investment can be particularly dangerous because you can end up taking risks you don’t need to.

It’s hard not to compare ourselves to others based on visible spending or consumption because it is often the only yardstick available. Psychologists refer to this as social comparison theory. When an objective measurement isn’t an option, we compare ourselves to what we see around us. We rely on these visual shortcuts — cars, houses, vacations — to figure out where we fit. Have we done better or worse?

Why wealth management comparison should not matter

wealth management comparing yourself to others
How much is enough for you? That’s the only comparison that matters

But our desire for validation comes with some serious blind spots. Income is relative to so many other factors that both the number of dollars earned and how they appear to be spent make for a worthless comparison. Your work colleague may drive an older car so he can retire early. Your cousin may earn $300,000 a year compared to your $150,000, but it comes with lots of work travel and weekend commitments. We simply don’t know.

Of course, we could make the comparison less personal. Someone could create an app that lets us track our financial data, pick a few variables and compare our status to other users. You could then discover that you make more than, say, 80 per cent of the people matching your profile.

But here’s the kicker. It doesn’t matter!

There is only one comparison that does matter. Do you have enough for you? Not enough for someone else, your work colleague or your cousin, but for you.

If the answer is yes, then it’s time to put away the yardstick and get on with life.

This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial and tax/or legal advice prior to acting on this information. Before acquiring a financial product a person should obtain a Product Disclosure Statement (PDS) relating to that product and consider the contents of the PDS before making a decision about whether to acquire the product. The material contained in this document is based on information received in good faith from sources within the market, and on our understanding of legislation and Government press releases at the date of publication, which are believed to be reliable and accurate. Opinions constitute our judgment at the time of issue and are subject to change. Neither, the Licensee or any of the Oreana Group of companies, nor their employees or directors give any warranty of accuracy, nor accept any responsibility for errors or omissions in this document. Gordon Thoms and David Conte of Calibre Private Wealth Advisers are Authorised Representatives of Oreana Financial Services Limited ABN 91 607 515 122, an Australian Financial Services Licensee, Registered office at Level 7, 484 St Kilda Road, Melbourne, VIC 3004. This site is designed for Australian residents only. Nothing on this website is an offer or a solicitation of an offer to acquire any products or services, by any person or entity outside of Australia.

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