Feel Better

Jonathan Clements

WARREN BUFFETT doesn’t have the best investment record over the past three decades. That accolade apparently belongs to Jim Simons. Buffett also isn’t the world’s richest person. In fact, he hasn’t held that title for the past dozen years and currently ranks No. 6, with barely half the wealth of today’s richest person, Jeff Bezos.

I doubt Buffett feels bad about this. Is your surname neither Simons nor Bezos? I don’t think you should feel bad, either.

Money can be maddening—if we let it. There will almost always be some parts of our portfolio whose performance disappoints. There will always be some folks who are wealthier. But whether it’s our investment performance or our overall net worth, we shouldn’t let ourselves be bothered by our relative standing. Why not? Here are five reasons.

1. We likely made more good decisions than bad. Just 52.6% of American households own stocks, according to the Federal Reserve. If you count yourself among that group, your investment performance has almost certainly been better than that of the stock-less 47.4%.

What’s your net worth—the value of your assets, including your home, minus all debt? If it’s greater than $122,000, you’re wealthier than half of all U.S. households. Yes, all of us throw the occasional pity-party for ourselves. But the fact is, if you’re reading this article, you are likely in far better financial shape than most of your fellow citizens.

2. What’s valued economically changes. Those who have been paying attention will remember me telling this story before: When my father graduated from Cambridge University in 1956, he took the highest-paying job on offer, which was £800 a year working as a reporter for the Financial Times. That was £100 more than he could have made as a management trainee for Royal Dutch Shell, which was the next highest-paying job he was offered.

By contrast, when I graduated Cambridge in 1985, my starting salary as a junior reporter was £6,500, less than half what my university friends earned by joining financial firms in the City of London. For today’s would-be journalists, the wage disparity is likely to be even greater. My point: The price that the economy puts on particular skills changes over time.

If we have a set of talents that aren’t particularly well-rewarded by today’s economy, we could try a different career and perhaps that’ll prove necessary. Still, pursuing a high-paying career for which we’re ill-suited is likely to be a miserable endeavor—and probably an unsuccessful one.

3. Don’t overlook the role of luck. With good savings habits and a little financial savvy, I think almost anybody can amass at least a modest nest egg. But we all know people who have done far better. Oftentimes, they appear to have lucked out, whether it’s because they have wealthy parents, a high-earning spouse, a single lucky stock pick, or a boss who takes a shine to them and pulls them up the corporate ladder.

I can tell you how to improve your chances of financial success, but I can’t tell you how to improve your luck. Still, here’s a suggestion: Spend a little time thinking about why others might view you as lucky. All of us get the occasional lucky break. We might view our good fortune as well-deserved—but others might see it otherwise.

4. We usually don’t know how others are truly doing. People often lie about their investment performance or they simply don’t know the truth. They boast about their winning investments, but conveniently forget to mention their losers, especially those that have been sold. They’ll talk about how much their portfolio has grown, but neglect to factor in all the new savings they’ve added. They’ll tout their market-beating returns but fail to note that the risk involved was far greater than that of a broad market index.

Similarly, people often try to give off an air of being more financially prosperous than they really are. Such signaling may make them feel good. But it also leaves them poorer, because it inevitably involves buying high-priced goods to impress those around them. We may instinctively assume that the appearance of affluence is the same as affluence, but in truth the former is the mortal enemy of the latter.

5. We may have less—but that doesn’t mean we aren’t happier. As recent research makes clear, money can indeed buy happiness. But I also believe that happiness can be bolstered by good health, a great night’s sleep, helping others, a fun evening with friends and a whole host of other factors.

So why do we focus on income and wealth as a proxy for happiness? Money is easily measured and—if we confuse affluence with the appearance of affluence—easily observed. By contrast, it’s often hard to gauge the state of the neighbors’ marriage, or their physical and mental health, or whether what they do each day seems meaningful to them. Yet these are almost certainly more important to their happiness than the size of their bank balance.

Jonathan Clements is the founder and editor of HumbleDollar. Follow him on Twitter @ClementsMoney and on Facebook, and check out his earlier articles.

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