“Comparison is the thief of joy” – Theodore Roosevelt
Have you ever felt really good about something in your life only to have your friends or family rain on your parade? You’re proud you just ran your first 5k until your coworker brags about running their 12th marathon. You’re excited about a $10,000 raise until your sister tells you about the promotion that doubled her salary. You love that new Honda you just bought until you park it next to your friend’s shiny Tesla roadster.
There are plenty of times in life where you may find yourself comparing your circumstances to those around you. It’s a natural human behavior. When it comes to personal finances, chasing the greener grass may sabotage your path to financial independence.
Here are a few examples of how you can shoot yourself in the foot worrying about greener pastures.
Many physicians will leave their first job after just a few years. Sometimes people leave because they don’t like the location or they don’t get along with their coworkers. Often it boils down to money. In Emergency Medicine everyone talks about their hourly rate. Rates vary widely across the country, but focusing solely on the hourly wage is short-sighted.
Docs who go chasing the big bucks may miss out on plenty of tax breaks. Like I mentioned in How to hide $215,000 from the IRS, my group takes advantage of every last tax break. It is true that my hourly rate is lower than some of the surrounding hospitals. It is also true that once you factor in profit-sharing, productivity bonuses, cash balance plans and a ton of other fringe benefits I am one of the highest paid emergency physicians in the state. I’m glad I was able to see the big picture when I was interviewing for jobs and didn’t focus solely on a big number I could brag to my friends about.
There are a million different side hustles you can pursue, but you have to keep in mind the opportunity cost. You would never take a week off of work so you could pick up shifts working the deep fryer at McDonald’s. Likewise, you shouldn’t give up your high paying job in the pursuit of lower paying side gigs. In the interest of this blog I may occasionally pursue activities that pay less than locums work, but in general I will try to focus on activities that pay more than $100/hour.
Hopefully you already have “past performance does not guarantee future returns” engrained in your brain. If you are constantly chasing whatever was last years hottest stock, mutual fund or asset class you will always be lagging behind. The simplest solution is to own the market through broad-based low-cost index funds. Set an asset allocation that lets you sleep at night and be done with it.
Warren Buffet once said “investing is simple, but not easy”. When I first learned about index funds, asset allocation and tax strategies at Bogleheads it was new and exciting. After a while the excitement waned. I created an investor policy statement and building wealth went on autopilot.
There was a time I started to research all sorts of alternative investments – not because I thought the returns would be better, but because I wanted to be excited about learning something new again. I think that is half the reason seasoned investors begin dabbling in real estate. I’m not saying there isn’t a role for alternative investments for some people. You just have to avoid being suckered into investing in something you don’t understand.
Don’t worry – this isn’t a “live like a monk so you can retire early” speech. It’s ok to spend money on things if they make you happy. Just make sure you are fully aware of the hidden costs. That 30 foot boat needs to be stored somewhere. Maintenance on that luxury car is expensive. If you’re like me and buy a big dumb house you will be surprised by the amount of time and money you pour into it. Don’t let the things you own end up owning you. Forget about keeping up with the Joneses. Chances are the Joneses are superficial show-offs who are up to their eyeballs in debt.
Keep Off the Grass
No one is perfect. Despite your best efforts there will be plenty of times in your life that you can’t help but look around and compare yourself to others. Be careful that you don’t let those comparisons sabotage your plans for financial independence. You might just discover the cash isn’t always greener on the other side.