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How Much Does She Spend? Why Comparing Yourself to Others Is a Mistake

Written by Sarah Gilbert - 9 Comments

How Much Does She Spend?

I spend too much time thinking about how other people spend money. (But! I’m a personal finance writer!) When someone mentions how hard it is to be a working mother in a two-income family, I think, but that’s a path you chose, working out in my head how possible it might be for that family to live just on one income. I’ll try to figure out what the mother’s partner does, and throw out a salary; two people can live on $80,000 alone! I’ll tell myself.

Or I’ll see a neighbor’s beautiful cars, their nice furniture and several game consoles in their small apartment, and wonder if they’re stuck renting because they spend so much money on cars and furniture and electronics and stuff. I’ll add up their phantom debt and feel better about my low-cost but high-intensity home, with its big yard and old furniture and family fleet of bikes.

Why I should stop obsessing about other people

I’d probably be better off focusing on my own finances. The advice that’s often used in spiritual circles applies in personal finances too. I think the 12-step people say something like, “Stop comparing your insides to other people’s outsides.” You could think of this, in financial terms, as comparing your savings-to-debt ratio to other people’s shiny new stuff. When you spend time obsessing about how other people are screwing up, or rationalizing your money decisions with others’ presumed habits, you forget to work on your own issues.

My friend Rebecca got me thinking about this back in December, when we were talking about grocery budgets. I estimated how much I spend each month at People’s Co-op, the grocery cooperative I belong to. The co-op pays out a share of the profits based on each member-owner’s spending for the year, so I mused about ways to allocate more of my grocery budget there. My spending at the co-op accounts for just a quarter of my monthly grocery bill. “Wow, that’s how much we spend on groceries for a whole month,” her husband said. I thought they were kidding. They weren’t.

The talk got Rebecca interested in tracking her grocery budget more closely. How low was it, exactly? How low could it be? She pitched an idea to xojane, the women’s online magazine, and when her piece on feeding her family on $129.99 for a month was published, there was an immediate flurry of responses.

Frugality and the $50 corkscrew

One of the photos accompanying Rebecca’s post showed a fancy wine opener. Someone asked how Rebecca could be so stingy about food when she owned a $50 corkscrew.

Rebecca was taken aback. The wine opener had been a gift: She had no idea how much it cost. Who knows, maybe it was purchased at a closeout store for $8.97! But the comment spoke to a larger question, which was, “Can you be considered ‘frugal’ if you save in one area of your life but spend a lot in another area?” (Sure you can. To speak in accounting terms, one is variable cost and the other is a capital expenditure. It might even be smart to spend extra on “capital costs” like wine openers, cookware and the like if it means they will last a long time. But I digress.)

There was an even bigger question, though, one that the commenting reader had ignored: “Isn’t there something I can take from this and learn?” There was plenty. Rebecca had made some insights about preventing wasted food, only buying pantry supplies you’ll actually use, and taking advantage of the abundance in her friends’ gardens. But some readers were spending so much time wondering how Rebecca could afford that pricey wine opener, how much her husband made and what sort of neighborhood they lived in that they were largely missing the takeaways.

Not keeping up with the Joneses

What’s driving our need to be so nosy about other people’s spending? Maybe it’s what or who we surround ourselves with.

I’ve read about studies that suggest people who don’t watch TV spend less. This is because the lifestyles depicted in many TV shows are upper-middle-class, while most of us don’t make upper-middle-class money. Studies show that people who watch more TV are more materialistic and are more likely to think that affluence — ownership of pools, tennis courts and luxury cars — is prevalent among Americans.

I won’t tell you to stop watching TV. But you could remember that the lifestyles of your favorite TV star (reality or no) and even the lifestyle of your favorite aspirational friend are not necessarily reflective of reality for most people.

This “keeping up with the Joneses” effect was huge for me when I went to business school and worked in investment banking — I mean to say, hugely bad. While I gained valuable skills and met wonderful people whose friendships I’ll treasure always, I also felt that I needed to spend money to dress, drive, travel, and eat like my friends and colleagues. If I’d stayed in investment banking, I know my life would be like the fictional (but very reality-based) protagonist of this short story, a banker whose lifestyle — kids’ private schools, vacation house, fancy cars, remodelings — moves in such close step with his salary that, when he doesn’t get the bonus he expected, he’s destitute.

When I left that life, I wasn’t so much destitute as just in a bad financial place. I was trying to keep up with people who not only made a lot of money but whose parents made a lot of money, too — so instead of going into debt for business school, they were using savings or getting help from their families. Despite this difference, I might have succeeded in maintaining my spendy lifestyle, but it would have meant sticking with the high-pressure, around-the-clock, slavishly corporate career path, which wouldn’t ever fulfill me (I wonder if it could “fulfill” anyone, truly).

Striving for my ideal self

Since then, I’ve tried to ask myself: If I lived in a world of my own making, how would I spend and save money? I’ve largely succeeded in being true to this. I’ve decided that art is more important to me than the appearance of having money, so I have chosen a career path that gives me lots of time to write literary things that are worth almost nothing. I’d rather have a beautiful vegetable garden than a nice car. I’d rather spend lots of time with my kids than send them to fancy private schools. I’d rather eat good food than keep up with the latest couture. I’d rather never have a reason to use a car service.

The spending comparisons creep in every once in a while. I have a couple of friends who have, despite the odds, earned huge advances and have sold oodles of books doing what I love — writing. And every once in a while, a wave of jealousy will pass over me and I’ll want to have what they have.

But then I’ll open a book like my friend Zac Bissonnette’s (he’s one of the New York Times-bestselling authors I grimly call “friend”). He says having $2,000 in a savings account can change your life. I can grumble, “Sure, Zac, easy for you to say… you’re working on your fourth book!” Or I can take a good look at his advice and say, “You’re so right,” then just say no to grabbing breakfast at Starbucks ($14) for my kids instead of making pancakes ($2 with lots of maple syrup).

Comparing myself not to the “outsides” of my friends but to the picture of my ideal-self-in-a-perfect-world keeps me focused on the financial decisions that will get me closer to that ideal self, not closer to the TV depiction of awesome. Ideal me has a lot more than $2,000 saved; she has a pantry full of home-grown canned goods, she’s taking her kids with her on a low-frills book tour and she’s found time to make her own couture-style clothes (I can dream). None of that is accomplished by worrying about how other people spend their money.

And doesn’t worry give you wrinkles?

Published on June 26th, 2012
Modified on July 1st, 2012 - 9 Comments
Filed under: Consumer, Frugality

About the author: Sarah Gilbert, blogger by trade and finance geek at heart, has worked in investment banking, dotcom management, software development, and managing blogs on everything from babies to stocks.

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9 Responses to “How Much Does She Spend? Why Comparing Yourself to Others Is a Mistake”

  1. 1
    Daniel Nalbach Says:

    This is a very well written and on-point article, Sarah. I struggle with this as well. My wife and I chose to have a large family, and that she would stay home with the kids. As a result, it has been a struggle for me to provide a middle-class income by myself. I have often tried to calculate other families incomes by what I see them own as well. My children are a blessing, and I do not regret the choices we have made, but the sacrifice of being a one-income family in a two-income society is very visible at times and often hard to put out of mind. Even people who make less than I do seem to sail right by me financially because of their spouse’s income. None of this should matter, and on my better days it doesn’t, but moments of weakness arise regularly throughout the year when I find myself checking prices on homes and cars to see what I am “missing”. Interestingly, I have a pair of friends that I find myself in the middle of from an earnings standpoint. One makes more than I do, and the other makes less. What is fascinating is that each has a similar house, used cars, and both live well. There is no real difference between their standards of living, despite a tremendous gap in earnings. I however, struggle to maintain a standard of living equal to either one. Each of them spend their money quite differently, but they both value savings, which I have historically not made an effort to have. The conclusion I have come to is that your friend is right, $2,000 or more of savings can change your life. The reason for that is because unexpected events come up every year that require cash on demand, and if we don’t have it, we end up making financially dubious decisions to compensate for not having it. The person with savings merely pays it out, absorbs the bump in the road, and keeps on going. Looking at my financial history, I can attribute most of my current dilemmas to decisions that were made based on an intense and sudden need that I did not have the savings to compensate for. In most cases I responded by committing myself to long-term debt. My two friends on the other hand are both largely debt-free, and have more freedom to spend their income than I do, whether it be less or more than mine.

  2. 2
    KT Says:

    The problem with trying to estimate income by looking at other people’s possessions is, you have no idea what compromises they have made. They may be deeply in debt to afford their “stuff”. Or they may take nice vacations, but they afford them by cutting back on something else that you wouldn’t, such as eating out or going to movies.

    We look at other people and notice the stuff that they have that we don’t, but do we notice the stuff we have that they don’t? Or the things we do that they don’t? Everyone has different priorities, as the article points out. Nobody “has it all”. Not in a world with finite resources.

  3. 3
    Someguy Says:

    I’m sorry, but this is mostly fluff. While it may not be useful or even valid to compare detailed categories individually, it can be useful and certainly valid to compare aggregates. For sure, it’s useful and interesting to me to know what percentage of gross and/or net income people save versus spend. It’s also useful to compare deeper categories, such as dining out and groceries. It’s more useful if all categories are included and ideally if the save-spend ratio is included. That way, personal priorities can be easily seen. For example, SomeGal and I spend 8-10% of our gross on travel, which shocks a lot of people (as being high). But we also spend 6-7% on our house (excluding any unexpected expenses/repairs), which is quite low.

  4. 4
    Ashley Says:

    Look, I love this site and I love your writing.

    But I really wish that personal finance and debt writing would stop demeaning people’s choices of fancy cars and private schools. I get it; you prefer experiences. And I do to. But I don’t want to feel like if I choose to buy a fancy car or send my kids to private school that those choices are not without merit. Especially if I have the cash to pay for it (I don’t. Nor do I even have kids or a car!).

    When you say that you want to keep your kids out of ‘fancy private school’ and value spending more time with them instead, there is still a hint of judgement and comparison when stating your choice and it’s insulting.

    It is possible to write about personal finance while espousing a debt free life without snarking on people’s choice to buy things instead of experiences or free time.

  5. 5
    Clark Says:

    I think this article makes a good point. I realized early on that whenever I found myself focusing on some fault or flaw in someone else, I needed to turn that attention inward and I could easily find that same flaw in myself. It is easy to judge other people as an escape from dealing with the same failings that are dragging you down but doing so is never productive.

  6. 6
    AnotherDude Says:

    I read the whole essay here, and it’s 1300+ words describing: “don’t compare yourself to others because you 1) don’t know their finances, 2) will miss out on your life, and 3) won’t be any better off for it anyway.”

    I have to agree with Someguy- this was mostly fluff and not as substantial as Nickel’s typical guest articles. Readers here like to assess their finances and gauge those of others- it’s not a chore for us. We realize we don’t know everyones finances, but we’re looking for good proxy measures to give us a point of reference in our own progress. If the people around me have a better managed grocery budget than I do, I want to know about it and I want to know what I can do to improve my own budgets.

    That said, the linked article about the $130 grocery challenge was just awful. I couldn’t make it past 2/3 before the disgust overwhelmed me. And most of the top commenters in the “flurry” hit the nail on the head.

    I’m sorry if I come off a bit too negative. I come here for financially relevant insights, not life-coach musings. This article (and the linked one) would be probably be more favorably received in other avenues- just not here IMO.

  7. 7
    Shawanda @ You Have More Than You Think Says:

    I enjoyed this piece. What difference does how many toys your neighbor has or how much money they have make? People need to look at their own desires and focus on how they can accomplish their individual goals. If someone has accomplished what you’d like to accomplish, then of course, you should try to learn from their success.

    I don’t judge people for their life choices. If you want to stay at home with the kids and make less money, that’s cool. If you’d rather be a member of a dual income family, drop your kids off at daycare, and eat every single meal out of the home, that works too.

    Not everyone who owns a big house, fancy car, and designer clothes is swimming in debt. And we shouldn’t assume that they are to make ourselves feel better about what we perceive as our own shortcomings. Quite frankly, I don’t give a crap about any of that stuff, but that’s me. If you like it and can afford it, buy it.

    I don’t have time to waste worrying about how you obtained something that I don’t even want.

  8. 8
    BC Says:

    Interesting article.

    We all chose a way to spend and save from what we learned. More savers I’m sure with people on this site.

    Yeah – seeing others spend so much – do we override our internal logic and desire to save and spend wisely in our own minds.

    Interesting read… now back to my own finances! 8+)

  9. 9
    large poster printing chicago Says:

    Cheers from Clonoe ;)

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