We underestimate just how much of our happiness is determined by who we are comparing ourselves to.
If we compare our standard of living to Earth 2.0, we’ll feel awful. Instead, if we look at how poor the quality of life is in some third-world countries on Earth, we’ll see just how good we have it.
It’s all about perspective.
Nowhere is perspective more important than in personal finance.
Our view of how good we’re doing financially is almost entirely based on how we’re doing relative to others.
This is why our satisfaction with our income is mostly based on how we stack up against our peers. You can earn $200,000 per year and still feel inadequate if your siblings and your best friends all earn $300,000.
Our income relative to others affects our happiness more than our absolute income.
This is why we don’t care that we’re wealthier than 99.99% of people who lived on Earth only 100 years ago.
That’s not who we compare ourselves to.
We care about how wealthy we are in relation to people we know today.
Unfortunately, the most common way we display our wealth is through our material possessions.
Our house, car, clothing, and gadgets. The stuff we own tells people how much money we have. And the only way to own more stuff is to spend more money.
That’s why most people suck at personal finance.
The number one way to kick ass financially is to spend less than you earn. The best way to spend less is to compare “down” instead of “up”, so you can more clearly see how good you have it.
This naturally leads to feelings of gratitude.
Research shows that expressing gratitude and counting your blessings on a regular basis is correlated with increased happiness.
It also has financial perks.
The more you’re grateful for what you already have – health, family, friends, shelter, food – the less you feel a burning desire to go out and buy more.
This leads to lower expenses, which we all know is the trick to reaching financial freedom a whole lot quicker.
Ultimately, gratitude helps us learn to be content with less. Because “less”, relative to most of human history, is actually quite a lot.
This article was republished with permission from Four Pillar Freedom.