Overcoming Unreasonable Financial Expectations

Do you find that some days it just feels like everyone is richer than you?  Read this, and feel better about your financial life.

This morning I got a text from my sister that reminded me that being a financial planner gives a person special insight into people’s personal finances.*  She texted me saying that she didn’t feel that she related to rich people.  She overheard a conversation between some people who were discussing their Tiffany candlesticks, second home in Aspen, and a $250 key chain, and she felt like they were from another world than her.

I told her not to worry, odds were good that they weren’t rich at all.  You see, it’s far easier to pretend to be rich than to actually be rich.  Anyone can, with a high enough income, borrow all the money they need to mime a spectacularly wealthy person.  For example, my sister has no way of knowing if the Tiffany candlesticks and key chain were bought with cash or credit.  She also has no way of knowing if the second home in Aspen was owned free-and-clear, or mortgaged to the hilt.  All she knew is that they could spend money freely.

I’ve met my share of these “fakers” as a financial planner.**  I’ve met a C-level executive of a Midwestern manufacturing firm that, at the approximate age of 60, had less than two years income saved for his retirement.  It’s not that he had periods of unemployment, it’s just that so many expenses had gotten in the way: private schooling for his children, the lake house needed to be kept up, they had to keep their cars up-to-date, and so on.  He had a tremendous income, but he just didn’t take that income and turn it into enduring wealth.  He looked rich, but wasn’t.

So, if there are so many people faking wealth, how do you know where you stack up?  There’s a nifty net worth calculator over at CNNMoney.com that can show the median income for a certain income level and age group.  If you’ve been fortunate enough to earn more than your expenses, and diligent enough to save up some money, then you can go see how you stack up against your cohort.  Remember, this calculator uses representative samples.  If you fall under the median, don’t beat yourself up.  You may have circumstances that prevent you from hitting the median, which is perfectly reasonable.

And, don’t feel bad that you aren’t spending as much as your friends, and don’t compare yourself to them.  They may have a situation that’s completely different from yours, and it is probably not a fair comparison.  Instead, compare yourself to what you are reasonably capable of.  Maybe you’re at a stage of your life where you can’t save up.  If so, just keep plugging away.  Remember, spending doesn’t equal wealth.

* As well it should.

** The stories are true, but identifying details have been changed to protect identities.

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