Monday, January 15, 2007

How Are We Doing?

I just got a nice email from Ben at MoneySmartLife, about a contest he's holding: readers are invited to submit a story about how a personal finance blog has inspired them. The entry that gets the most comments will win a free 1-hour consultation with a certified financial planner. Ben called my attention to an entry which mentioned me and Boston Gal:

The two bloggers I find most inspiring are Boston Gal and My Open Wallet. Like them, I am a thirtysomething single woman. They have shown me that it is possible to make it financially on your own. I am not doing as well as they are: I am 33 years old, my salary is only $53k, my net worth is only $135k, I’m still renting an apartment, and I drive a 15 year old car.

Of course it's very gratifying to be mentioned-- this is the kind of thing that makes me feel really good about blogging. But here's what bothered me a little: It's not the first time I've seen this kind of comment, about not doing "as well" as someone else. It's good to be inspired by people whose financial habits or success you wish to emulate, but I think everyone should be careful about judging themselves against others, or against any kind of absolute benchmark of what your net worth "should" be. As I commented back to Emily, it sounds like she's doing just fine. I am several years older than her, but at her age, my situation was quite similar... worse, perhaps, as I didn't have a car, even a 15-year old one!
Age is a big factor in judging your financial situation. Someone whose salary is $50,000 and net worth is $100,000 may be in great shape... or not so great shape, depending on whether they're 25 or 65. (Of course regardless of their age, they may be better off than almost half the people in this country, as the median income and net worth in the USA are close to those levels.) Salary itself is a factor in whether your net worth is a sign of overall financial success-- if you're making $100,000 a year but only have a net worth of $50,000, you either spend too much money, or you're carrying a lot of law school debt, probably! A commenter on this blog recently remarked that even now, my net worth isn't necessarily all that great in relation to my salary-- I'd take that even further to say that it's probably really low in relation to most of my college classmates, many of whom have parlayed a top-notch education into careeers in law, medicine, Wall Street, politics, etc.

So many issues come into play-- family background, education, personality and luck. We all come from different starting points in life. Some of us are always going to have a harder time than others in reaching that American dream of a life of financial security-- we all dream different versions of that dream anyway. And of course one of our great political divides is between those who believe that hard work is the only thing needed to succeed, and those who believe that the playing field is not even enough, and that many people who truly work hard still can't get ahead. I'm not suggesting people should come up with excuses for why their net worth isn't higher-- I'm just saying don't be so hard on yourself if you don't feel you measure up to some mythical ideal.

So think about all these things when you look at your own financial situation. What did you start out with? What do you want to end up with? How much time to you have to get there? And most importantly, how are you working towards that goal, from today on? You might be in better shape than you think... or you might not, but you need to ask yourself the questions either way.


Ben said...

I certainly agree with you that comparing your own financial situation to that of others can be misleading.

The reason personal finance is "personal" is that each person has different life situations that affect their finances. Because of this comparing financial situations is never apples to apples.

That being said, I do compare myself with everyone else. What I try to do is draw inspiration from those more well off and to help out those not as far along.

mOOm said...

Sounds like Emily is doing fine. Her salary is near the average for all college grads and her net worth above the US median. My net worth was $37k when I was 33. No house and no car. But I don't have a house or a car now either :)

Debbie said...

Ha! The first thing I did when I read Emily's description was to compare myself to her: I am 43-year-old single woman, my salary is only 39K, and only because I got a huge raise two years ago (when it was 34K), my net worth is about 200K, but half of it is the net value of my house, and I drive a 16-year-old car.

However, I think I'm doing great anyway. I'm set to retire at age 52 (unless they change the rules again, and they very well might), and I can afford anything I want, although not everything I want.

I think comparing ourselves to others can help us see what is possible for us. But we can only go so far because we are not exactly like anyone else. For example, my job sounds terrible compared to the jobs of most of my friends, but I never work more than forty hours per week, so a lot of my pay is in time rather than money, and that's how I like it.

SF Money Musings said...

It's good to know we shouldn't go so hard on ourselves regarding our networth.

I got started late in my career ... at 24, which isn't all that late. But most college grads I know start working at 21 with salaries at 40 -50K.

Even though I just contributed to my ROTH IRA and 401K, I'm saving a lot more and spending less per paycheck. So it's taken me several years to fully understand budgets and managing money but at least I've got it together somehow. My biggest fear is that I'll be making 30K for the rest of my life if I don't start saving or being more aggressive with my career.

Mase said...

re: your blog

Although I keep track of 25-30 weblogs with at least a majority of PF posts, yours is one of a half-a-handful for the PF blogs that I find to be consistently engaging. Your posts always provide very good advice, are well thought out and written, and you never do extraneous posts just to have a fresh entry.

So, Madame, thanks for helping a lot of us out and writing one of the best PF blogs out there.

- Mase

Tammy Ames said...

Comparing ourselves to others is a hard habit to break. As for "What did you start out with?"......... I'm starting from scratch with little at 45 and I time is not something I can think about BUT I have created a new starting point this year. I am focused, working from this day on toward my goals for 2007.

It's not productive to look at where others ARE but consider How they got there.


Millionaire Artist said...

I think you bring up a crucial point, thank you! Its very easy to get discouraged if you compare yourself to others. Instead, focus one day at a time on your own objectives and be thankful for all you do have!

moneymonk said...

Same here, everyone is different. Each person has different debt as well as different assets for different reasons

Just having a positive net worth, You already on track. Just save and invest your money on your own terms.