My relationship with money is complex. Yours probably is too. Maybe not for the exact same reasons as mine but you are human too.

It makes the answer to the above question far more difficult than it appears at face value to me.

If I were to frame it as ‘Would I rather make R100,000 or R150,000?’, the answer is quite simple.

But as soon as I make it comparable to everyone else, things get complicated.

To be honest I don’t have a reference for the research where this question was tabled but apparently most people (whoever they are) opt for OPTION A.

Yes that’s right. On average people would opt to earn less money as long as they earned more than everyone else. All else equal.

And the all else equal part is important because it means we can all consume the same things, at the same price and get the same use from money as everyone else.

But in reality, we don’t know what any of the values mean in terms of what lifestyle we could afford at each level. Does it meet our basic requirements or does it allow us to live the life of our dreams? The answer is clearly different for each person.

We don’t all want the same things in life. Some prefer a nicer car or house and others may choose more free time. Some get to do both. But what constitutes a nicer car or house is also open for debate.

But all else equal it is still a question worth contemplating.

In my mind:

OPTION A:

  • Is a framework where we are making decisions based on comparing ourselves to others.
  • I don’t want to feel poorer than other people. I want to be richer than other people.
  • I think more money means nicer things which means more happiness.
  • It supports the view that money management is as much about emotions as it is about numbers.

OPTION B:

  • Clearly has more of a focus on my own journey.
  • What do I need to live a life that I feel is worthwhile.
  • There really are things in life that money can’t buy.
  • What do I need to give up (time, peace of mind, health) in pursuit of more money.

WHAT IS THE RIGHT ANSWER?

I am not here to say which is better. I do think it is a question worth contemplating though.

On that note here is an article worth reading for more concepts that are very important and hard to teach.

You can also see how to perhaps think about framing your investment approach to the life goals you have here.