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What are you Jonesing For?

I have a confession to make – I’m not sure the last time we mowed our lawn.  Judging by the fact that half of my dog disappears when he makes his trips outside, it’s been a while.  To be fair, we have been doing a major overhaul to our landscape which has taken most weekends for the last two months and getting plants in the ground before it snows has been a little higher priority than a good trim and edge on the grass.  Even so, I still have that feeling you get when you’re worried you’re the bad neighbor.  Luckily for me, there is a house on my street that is so overgrown it would put Miss Havisham to shame and even though I drive by it and roll my eyes every day, I secretly appreciate their disheveled mess because at least I know my yard isn’t the worst on the street.

That’s what we do, though, isn’t it?  Compare ourselves to others?  Try to keep up with the proverbial Joneses?  It’s a perfectly natural and even instinctual thing to do.  At some point along the human evolutionary journey, ostracism jeopardized survival.  Even today, feeling out of place is not a very nice experience.  So, we compare and calibrate ourselves to what we think is normal and what we “should” be.

This act of comparison that I call Jonesing turns out to be pretty powerful.  It takes our feelings and changes them depending to what or to whom we compare ourselves.  It changes our behavior, too.  In some instances, knowing what our peers are doing helps us improve.  Utility companies have shown that knowing how energy-efficient your neighbors are influences people to reduce energy consumption.  I know when I’m out to eat with friends and they insist on ordering something healthy, I’m usually more inclined to follow suit.  “No, I wouldn’t dream of ordering that delicious pasta dish – I’ll have a salad, dressing on the side.”

Of course, peer influence goes the other way, too.  Friends can just as easily talk to you into splitting dessert as they can shame you into a salad.  The question is, when it comes to money does Jonesing help us or hurt us?  Are we better off knowing what our peers are doing or not?

Researchers from Harvard University and the University of Pennsylvania’s Wharton School recently evaluated the impact of peer comparison on retirement savings.  They sent 1,400 workers who had not previously participated in their company 401(k) plan a simple enrollment form.  All they had to do was sign and return it and 6% of their pay would start going into the plan.  A subset of the letters included the percentage of people in that worker’s age group who were already saving to the plan; the other letters had no peer data at all.  If you’re like the researchers, you may suspect that seeing what others were doing would increase the number of workers who enrolled in the program.  It turns out it did just the opposite. The workers who saw what everyone else was doing were 33% less likely to enroll.  In fact, the better their peers were at saving, the less they were inclined to start.  It didn’t inspire them to save more; it seemingly discouraged them from even trying.

In another study published in the Quarterly Journal of Economics, researchers measured the relative happiness of individuals in the same neighborhood.  What they found was that people’s happiness is diminished when there is a disparity between how much money they and their neighbors make.  Whether the subjects’ income decreased or their neighbors’ income increased, the widening of the income gap led to decreased happiness.  The change in emotions led to modified behavior as well; people reported that they had sacrificed leisure activities and even let friendships suffer in order to keep up appearances with the Joneses.

So, what do we do? Should we try to stop comparing?  I would argue it’s almost impossible to stop comparing ourselves to others.  That said, I think we can do it in a way that helps us avoid discouragement and choices that don’t make us happy.  Consider this – downward social comparison, comparing ourselves to those who are worse off, has the reverse effect of Jonesing.  This type of comparison has even been shown to lead to better physical and emotional health (i.e. reporting fewer cold symptoms and increased well-being).  I’m not suggesting we go around reveling in someone else’s plight, but there is a conscious choice between focusing on what we don’t have and focusing on what we do have.  Practicing gratitude has been shown time and again to lead to increased happiness.

We can also put ourselves in situations that help us succeed.  The house in the nicer neighborhood might make you happy; it might also make you unhappy if the pressure to keep up with the people in that neighborhood puts a strain on you and your finances.  The people, places and things we surround ourselves with will affect our choices and our happiness; knowing that goes a long way.  It’s enough to make me call the salad friend and not the dessert friend if my goal is to fit into my skinny jeans.

The good news is that comparing ourselves to others makes us totally normal.  What’s even better is that with a perspective change and intentional choices, we can kick our Jonesing habit and make financial choices that are beyond compare.