“Keeping up with the Joneses” is embedded in American culture. As a society, we are constantly comparing ourselves upward to someone who’s done more, has more, or earns more. And this is true for all income levels. Many researchers, such as Ball & Chernova, Clark et al., and Diener & Suh, found that where a person believes he or she stands relative to others has a much larger effect on happiness than absolute income.
Many of your clients may be financially stable or very well-off but are still tormented by their finances. As advisors, how can you help these clients reduce their financial anxiety and even improve their financial well-being?
To answer this question, we explored the power of social comparisons and identified a few ways that advisors can use this natural tendency to help their clients.
The factors that influence our social comparisons
In our research, we found that certain mental factors—the direction, frequency, and target of social comparisons—had strong associations with financial well-being. Our analysis showed social comparison explained more of the variation in financial well-being than a person’s income level, age, gender, or education.
Who your clients compare themselves with and how often they make these connections can have a huge impact on the way they feel about their finances. Although you can’t stop your clients from comparing themselves with others, you can help them change the direction and target of their social comparisons to elicit more-positive emotions with their finances.
Our upward social comparisons may be bringing our spirits down
Our research shows that people have a tendency to compare themselves with those who are better-off, and this was strongly associated with negative financial emotions. In other words, most of us seem to be actively making ourselves feel bad about our own financial circumstances by always looking up to those who have more.
Based on our findings, the key to helping your clients feel better about their finances is to redefine who they’re comparing themselves with. Try redirecting the focus of your clients to a subject that makes them feel empowered rather than demoralized. This can mean steering them toward making downward social comparisons—to help them appreciate how good they have it. Although this may be a cliché, it’s backed by solid science.
Another option is to help your client find a new financial role model. Previous work has found that looking up to a role model might help a person's well-being, and our results support this claim.
In either case, when it comes to helping your clients change the focus of their social comparisons, there are a couple of things you should keep in mind:
- Make sure your clients can connect with their new comparison target so that the effect is strong enough to have an impact on their financial well-being. This means they must be similar enough to your clients that they still have a few things in common.
- Although it’s important to aim high in all our aspirations, this may backfire when it comes to picking a role model. If your client chooses someone whose accomplishments are too far out of reach, your client may start to feel discouraged.
Research shows that comparing ourselves with others is a natural tendency. But for clients, this behavior may negatively impact their financial well-being. As advisors, there are a few levers you can pull to help your clients redefine the focus and direction of their social comparisons to help them have more positive emotions with their money.