Money See, Money Don't

One of the things that makes money so tricky is that we often forget how much of it is invisible.
We see what people spend, but not what they earn or what they save.

You really don’t know if you’re watching other people live within their means, below their means or above their means. Unless you win the lottery or inherit money, you accumulate money by living below your means. It’s that simple. If you’re earning more than you spend and saving and investing the difference you could accumulate wealth over a long period of time even with a relatively low income. If you’re spending more than you earn, even with a really high income you (or your heirs) will eventually run into problems.

You know that there are people who live above their means who eventually go broke (invisible, at least until they go broke) and you know that there are people who live below their means who might save while living modestly (invisible, until they die and leave a library millions[i]).

Sure, you can see the clothes someone wears, or the car they drive, or where they live, and you think you know something about their finances, but you don’t really. You fill in these information gaps with stories you tell yourself. I think it’s common to assume that the people who have more money you can see are people who have more money, the reality though is that those are just people who spend more money. Maybe they have it, but maybe they’re teetering on the edge of financial ruin.

For whatever reason it’s still often considered taboo to talk about money, especially income. People who are good with money tend to be savers. Most saving habits are invisible. Appearances can be deceiving.

Imagine trying to guess how people will perform in a marathon by only watching the first 100 meters of the race.  You do this all the time when you think you know something about the financial health of other people. An average adult could complete a 100-meter sprint at a pace that exceeds a world record marathon pace but an average adult couldn’t finish a marathon[ii].

Or, imagine seeing just the end of a marathon, just the last 100 meters, without knowing if the runners you see crossing the finish even ran the whole race, or took a taxi or a limo most of the way, or started 101 meters from the finish line?

It’s easy to forget that the persistent tortoise can beat the arrogant hare.

It can be really difficult to avoid comparing yourself to other people when it comes to money, especially in the days of social media, but it is incredibly important to remember how little you actually know about other people’s financial wellbeing.

Unless your financial goals are to convince other people that you have a lot of money there’s a really good chance that anything you do with that intention is not in service of your actual goals.

Financial freedom comes not from other people thinking you have it but from the accumulation of money you didn’t spend or the realization that your material needs are less expensive than you thought. It doesn’t come from spending money, so stop looking at the ways other people appear financially as anything but a distraction. At best, that’s all that it is, at worst it’s a path towards jealousy, unhappiness and ruin.

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Photo Credit: Jamie Haughton via Unsplash