- Don't be too sure.
In this example, the black dot in the middle is me. Some "communities," or groups, to which I belong, are the large group of all residents of New York City, the smaller group of upper middle class Ivy League graduates, and the very small group of people who live on my block. (Obviously the sizes of the circles aren't intended to be exactly proportionate to the real numbers of people represented.)
Depending on the situation, I might think of myself as identified with these groups to varying degrees. Most days, I don't feel like I have a whole lot in common with the group "New Yorkers." New Yorkers are a pretty diverse bunch, and most of us feel no need to smile at each other on the subway and say "Hey, you live in this city too! Howya doin'!" But if I was in a small town in Uruguay and overheard someone saying they were from New York, I might say "Wow, I'm also from New York!" Of course I don't always consider myself "from" New York, or I might downplay that identification, for instance if I was with family in New England who were all watching a Red Sox game.
We all have these shifting hierarchies of identity. We are citizens of the world, our country, our city, our apartment, or even just our corner of the room. So how does this relate to our financial lives?
For every identification we make with some group, we position ourselves within that group by our income, our consumption, our possessions. We like to know where we stand against others-- are we richer or poorer, is our house bigger, is our car newer, do we have more or less saved for retirement. And we think things like, "well everyone around me in this community that I belong to goes on vacation every year, so I should be able to do that too." And studies have been done that show that people often feel happy or unhappy not so much because of their own financial status per se, but because it is higher (happy) or lower (unhappy) than that of the people around them.
I try to think about these issues a lot. In this blog, I often say things like "I pay $80 for a haircut, but that's not that bad by New York standards." Or "I love my tiny studio apartment but my friends can't believe I live in such a small space." Or "publishing is an underpaid industry." These are all "true" in some ways, but if you shift the context, they seem all wrong. Someone in Africa could live for months on what I pay for a haircut. And they probably live in far less space than my old studio apartment... but someone in London might think my studio was actually relatively luxurious for the price, given that housing is even more expensive there than it is in New York. And someone who works at McDonalds or Walmart would probably be thrilled to make a publishing salary. What about the fact that my net worth is much higher than the average American's? Does that mean I can just relax and say I'm doing well? What if I compare my net worth to those Ivy League grads? Suddenly it looks like I'm way behind.
So part of this rule comes down to
- Judge yourself against your own standards and goals rather than comparing yourself to other people.
- Have a social conscience.
Then there's that
- Don't worry about keeping up with the Joneses
- What you spend does not determine who you are; who you are doesn't have to determine what you spend.
But what about some less extreme examples? Maybe "people like me," i.e. well-educated, somewhat tech savvy, employed in media field, financially secure bloggers, tend to replace their computers more often than every 10 years. Should I? Maybe "people like me" have cable TV. Should I? Do "people like me" have weddings that cost $10,000? Or $30,000? Or $500? Do we go skiing for a week every winter? Do we only buy our clothes at certain stores? Do we send our children to private school? Do we only live in certain neighborhoods? Do we pick up used furniture off the street? Do we have full sets of matching glasses and plates and silverware?
Everyone will have a different perspective on these questions, but I think we can all challenge ourselves to expand the definition of "people like me" to include "people who have less than me" rather than "people who have more than me," and spend less money by eliminating at least one thing in our lives that we think we "should" have, but don't really need.