It’s so easy to look around at friends, neighbours, colleagues, and wonder, “How can they afford that?”
Someone you know just bought a beautiful new home. Someone else is taking another European vacation. A friend is driving a new luxury SUV. Someone you went to school with has apparently retired early. And then there is you, wondering whether you are saving enough.
Clients often ask me if they are doing as well financially as other people or couples their age. It’s a natural question, especially when you’re trying to figure out whether you’re on track. But the truth is, everyone is on their own financial journey, with their own goals and priorities. There is no magic number that can be used to compare one family to the next. Financial health is personal, and what works for one person may look very different for another.
The problem is that we are often comparing our financial reality to someone else’s visible lifestyle, and those are two very different things. We can see what people choose to spend money on, but we rarely see the financial picture behind those choices. We don’t know how much they have saved, how much debt they carry, what their mortgage looks like, whether they received an inheritance, or whether they are sacrificing other financial goals to support the lifestyle we see. They may simply have very different priorities than we do.
A $1.2 million home doesn’t tell you someone’s net worth. Neither does a luxury vehicle or an expensive vacation. What we see is what they’re spending, not the complete financial picture.
Social media has made this even harder. We see the highlight reel of other people’s lives every day, but we don’t see the ordinary Tuesday night, the financial decisions being made behind the scenes, or the things they may be choosing not to spend money on. It’s easy to assume that what we see represents the whole picture, but it doesn’t.
One of the most important distinctions in financial planning is the difference between what you own and what you spend, but net worth and lifestyle aren’t the same thing. Two people earning the same income can have completely different financial positions. One might have significant monthly expenses and very little invested, while another may have fewer expenses and be steadily building their savings and investments. From the outside, you may have no idea which person is actually in the stronger financial position.
I’ve also seen how financial priorities change throughout different stages of life, and that’s why there isn’t one definition of financial success.
One family may prioritize travel. Another may want to pay off their mortgage early. Someone else may choose to work longer so they can spend more today, while another person may prioritize retiring early. Some people want a larger home, while others would rather have fewer expenses and more flexibility. None of these choices automatically means someone is better or worse with money.
A good question to ask yourself is “Is my money helping me build the life I actually want?”
Financial comparison becomes particularly problematic when it starts changing our own decisions. We see what other people are doing and begin to question whether we’re doing enough. Our income increases, and instead of deciding intentionally what to do with the extra money, our spending gradually rises to match what has become our new version of “normal.” This is a big reason lifestyle creep can be so subtle. There is always something a little bigger, newer or nicer just beyond where you are today. But if you are constantly measuring your financial life against someone else’s, where is the finish line?
Instead, a much more useful comparison is to look at your own financial progress. Are you saving consistently? Are your debts manageable? Are your investments aligned with your goals and time horizon? Are you making progress toward the things that matter most to you? Has your financial position improved over the past few years? Do you actually have a plan?
Financial success doesn’t necessarily mean having the biggest house on the street or taking the most expensive vacation. It can mean having the freedom to enjoy the things you value without worrying about whether you can afford them. It can mean being on track for retirement, helping your children while still protecting your own future, or having enough flexibility that an unexpected expense doesn’t derail your plans.
There will always be someone who appears to have more. But in reality, you don’t know their full financial picture, and they don’t know yours. The goal of financial planning isn’t to make your financial life look impressive from the outside. It’s to make sure your money is working toward your definition of a good life.
Sometimes, the healthiest financial decision you can make is to stop looking sideways and start looking at where you’re going.
The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This blog was prepared by Amanda Ashwood, for the benefit of Amanda Ashwood, Financial Planner with Crawford Ashwood Financial, a registered trade name with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this blog comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any securities. Mutual Funds are offered through Investia Financial Services Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the Fund Fact sheet or prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.