People like to observe other people, and people quickly judge other people’s decisions. It’s natural, though often unhealthy. This is particularly true when it comes to financial decisions.
We view other people’s financial decisions through our own filtered lens. Our filter makes it difficult, if not impossible, to fully understand why some people do certain things with their money.
Take spending for example.
You walk out your front door and see a sparkling new vehicle parked in your neighbor’s driveway. Immediately, thoughts rush into your head. “They don’t have that kind of money.” “That’s a bigger vehicle than they need.” “It must be nice to buy whatever you want, whenever you want it.” “That’s a waste of money.” “Someday I’ll be in their shoes.”
Whatever the thoughts, they are colored by our own filtered lens. So when other people’s spending doesn’t match our priorities, we are quick to judge. We think they are doing it wrong.
But what it probably means is their priorities are different than yours. Or their financial situation is different than yours. And that’s okay. Their spending doesn’t have to impact you if you don’t let it.
And truthfully, judging other people’s financial decisions is always perilous because you never know their full financial picture. You don’t know what their bank account holds, or their 401(k). You don’t know if they just received an inheritance or if they have credit card debt weighing them down.
You know your own financial situation and thus every financial decision made by others is judged with that framework in mind. Concerning yourself, however, with other people’s decisions is a good way to get wrapped up in an irrelevant internal monologue.
Other people’s spending might not be right for you, but that doesn’t make it wrong for them.
The same goes for investment portfolios.
Two retirees may have dramatically different portfolios because they are trying to achieve completely different things with their wealth.
For instance, you could have a retiree who invests solely in stocks. That may seem wildly risky to some, who hate seeing their portfolio value dive when the market tanks. But if the retiree has 500 acres of farmland that fully provides for their yearly living expenses, it may not seem so crazy.
Or perhaps the retiree’s goal is to give as much as possible to charity at their death. In that case, stocks would give them the best chance of achieving that goal, and it would appear to be a much saner way to invest.
What works for others may not work for you. And, again, that’s okay. We are all different. We have different personalities, different objectives, different levels of wealth, different upbringings, and different ways of thinking about the world.
There’s something freeing you get from ceasing to judge other people’s financial decisions. For one, it relieves the mental strain of trying to figure out the whats and the whys of something that has no impact on you. It also stops the constant comparisons we make between ourselves and others when it comes to money.
This is a great time of year to pause and be thankful for what we have, not to worry about what others have or do.
We all make irrational decisions at times with money – whether that’s spending more than we should or not spending at all because we can’t bear parting with it.
Give others the benefit of the doubt when it comes to financial decisions.
Hopefully they’ll do the same for you.
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