Parents always advise their children to be content with what they have and rightly so. Yet whether they know it or not, everyone is trying to keep up with the Joneses in some way, shape or form, and this common human affliction can have a huge impact on financial decision making.
“Let’s face it, we all want what our neighbor or our friend has,” says Paul Puckett, an investment advisor and author of a recently published book entitled “Investiphobia: Overcome Your Deepest Investment Fears.”
Puckett believes that the fear of not keeping up with the Joneses is a major impediment to proper financial planning. People generally lack confidence in themselves, he says, and they’re bound to think that their neighbor or their friend has a sounder handle on finances and has made better-paying financial decisions than they have. But the desire to have what their neighbors have, or what they perceive their neighbors have, can often lead people to make rash investment decisions that are detrimental to their portfolio, he says.
The fear of not keeping up with the others is a very real fear that financial advisors need to help their clients work through.
“You don’t want to feel like you’re missing out on something good, so if someone is telling you an uncommonly positive story, you’ll want to be a part of it,” says John DeGoey, a financial advisor with Burgeonvest Bick in Toronto.
A big part of the problem, he says, is that people benchmark themselves against what they think their peers are doing, but without really knowing what those peers are actually doing.
“As advisors, we really need to help our clients figure out their financial goals and get them to not worry about what their neighbors and friends are doing,” he says. “We need to work through with people so that they understand their circumstances, so they can protect themselves from themselves, because most people are their own worst enemy.”