We often feel compelled to treat ourselves and wear specific brands, drive a nicer car, wear a fancy watch, buy the newest gadgets, compete to have the largest TV, disproportionately show off our rare and nicest moments and travels on social media, etc. We have pride and we want to be cool.
Spending is Visible
Similarly, we also tend to associate the level of other’s prosperity with what we see them doing, wearing, and buying. The truth is what we see people spend their money on tells us nothing about their level of success; it only tells us about their level of spending.
We share with the world when we have a special event or dine out and we pay attention to others who are doing the same. This isn’t really bad or wrong, but it does give us a disproportionate look at life. We see everyone’s best moments, and we share ours too, leading to sometimes subconscious comparison and competition.
Comparison is the thief of joy – Theodore Roosevelt
The problem with our desire to treat ourselves or signal an elevated status is that it often requires some kind of expense. By playing keep up with the Jones’s we commit to a losing contest where we judge our success compared to other’s by looking at what we purchased vs. what they purchased.
Saving is Invisible
No one is taking selfies while making a deposit at the bank or updating their automatic investment contribution amounts. The problem with saving money is that you’re not necessarily satisfying your pride and desire to achieve what looks like a higher status to yourself and others.
How would we modify our saving habits if we always knew the value of each other’s savings? Imagine if, in some kind of video game-esque reality, everyone had a bubble over their heads with their net worth always visible. People would almost certainly modify their behavior to maximize that number just like they act now to maximize likes on social media.
The biggest deterrent to saving is we don’t see each other do it.
A Humble Middle Ground
Hording money can lead to problems as well. After all, the love of money is the root of all kinds of evil. However, we should make an effort to be self-aware and wise with our resources. We should realize when we’re envying status as well as when we’re loving money. Then make an effort to remain rational, which can be quite difficult when it comes to money.
Being frugal can mean choosing to appear to have less status in the world by taking a slightly more humble route. Keep driving that old car, wearing those generic brand jeans, and breaking down those worn shoes. Do the invisible: save to create real status. Buy things that deliver actual value rather than a perception or feeling of status.