Humans are inherently competitive. Whether it's keeping up with the Joneses or keeping up with the S&P 500, we look for benchmarks in every aspect of our lives. At work, we seek career progression. At home we seek to marry the right spouse, live in a neighborhood that reflects our success, and take vacations at destinations that leave our neighbors green with envy. Every day, we seek to acquire material goods the represent "the good life." Even our children are not immune to the competition. We want them to wear the right clothes, go to the right schools, take the right career path, and give us grandchildren that we can be proud of.
With all this benchmarking going on, one might expect our competitive natures to drive us to achieve success, yet success is elusive. If you can afford a weekend at the beach, why not a week at Disney? If Disney works out, why not a trip to Hawaii? After Hawaii, a trip to the French Riviera might be nice. Been there, done that? What about Positano? Italy is lovely this time of year, and everybody who is anybody has already been there, why not you?
The same holds true with cars, houses and of the other toy and trappings of wealth. Somebody else always has something that you want. So, what's the solution? Consider changing the benchmarks.
It's All Relative
Most people judge their success (or lack thereof) by what they see around them. From an investment perspective, this is referred to as a relative return comparison. Common benchmarks include family, friends and the people across town. Of course, the comparisons don't stop there. Courtesy of non-stop advertising, reality television and a cultural fascination with celebrities, everyday people get a glimpse at Madison Avenue's version of the good life. You can find out where Donald Trump goes for dinner, what Michelle Obama wore yesterday, and what kind of car A-Rod drives.
Producing your credit card or signing on the dotted line can give you instant access to some of those very same trappings of fame and fortune. The problem with these comparisons is that you always come up short in the end. Sure, you can drive the same car A-Rod drives, but you probably can't afford every car he owns. You can dine where The Donald ate, but you'll be flying coach to get there. In the end, you are left wanting more and feeling like what you have achieved is inadequate.
If you find yourself in this situation, think back to something your mother probably said: "Don't worry about what other people have; worry about yourself." Cliché, perhaps, but also quite true.
In investment terms, this is referred to as an absolute return approach. Absolute return differs from relative return because it is concerned with the return of a particular asset, and does not compare it to any other measure or benchmark. In this case, the asset is your life, and the benchmark is your happiness.
Making the transition to living an absolute return life in a relative return world can be a challenge. To do it successfully, you need to plan for it just as you would plan for any other financial goal. The process starts with an evaluation of where you are, and a decision about where you want to be. (For closer look at this part of the process, read Life Planning - More Than Just Money.)
Once you've determined your destination, it's time to evaluate your current position. The objective here is to determine where you are in relationship to where you want to go. After you've mapped out the territory, the next step is to develop a strategy to close the gap. (Enjoy Life Now And Still Save For Later and Is Your Financial Situation Sustainable And Renewable? provide some guidance on the process of planning for change. The final step is to take action and implement your plan.)
Conclusion: Happy, At Last
The key to success is to focus on yourself, without making a comparison to your cousin or the guys on the golf course. The quality of life that comes with self satisfaction and financial security can be significantly more satisfying than the treadmill of keeping up with the Joneses. So when life feels like a hedonic treadmill, step aside and rest; the rat race will still be there tomorrow.
Once you've made a successful transition, take a little vacation to give yourself a reward. Instead of going to an "in" destination, do something fun. (For some help with making your travel plans cost effective, check out All-Inclusive Vacation Keeps Travelers On Budget, 3 Money-Saving Cruise Ship Tipsand Save On Planes, Trains And Automobiles.)