Talk to any real estate agent, and they will tell you that you should buy the smallest house in an expensive neighborhood. That way, your home will retain its value. Buying the largest house in a less-expensive neighborhood means that your home value will get dragged down toward the median for the neighborhood.
But, it turns out that purchase won’t maximize your happiness. Research suggests that you are happier when you own the biggest house in a neighborhood of less valuable homes. This happens because of your tendency to make social comparisons. That is, you compare yourself to other people.
When you compare yourself to someone better off than you, that is called an upward social comparison, and it tends to make you unhappy (though it can sometimes be motivating to make you want to be more like them). When you compare yourself to someone worse off than you, that is a downward social comparison, and it tends to make you feel more satisfied with your lot in life. So, walking past a bunch of houses that are more expensive than yours can make you feel bad about where you live, which can then decrease your overall satisfaction with life.
The problem of unfulfilled goals
Comparing yourself to others is a natural thing to do in a variety of ways. You notice the clothes that other people wear. The cars they drive. The things they do with their family and friends. You see the pictures they post on social media.
One thing that promotes these comparisons is the goals you have. Suppose you have always wanted a particular car, but can’t quite swing the payments. In general, having unfulfilled goals make you notice things in the world related to that goal. That can be helpful if you’re trying to mail a letter and it helps you notice a mailbox in the world. But when there is a car you’re pining for, and you then notice all the other people who are actually driving that car, it can make you feel bad. All of those people who own that car are broadcasting to you that they can afford the payments that you can’t. So it naturally seems like they have more money than you.
That experience can happen to you repeatedly. You see pictures on social media of vacations your friends have taken that you can only dream about. You look at the cars in your office parking lot that you would love to drive. You see crowded restaurants that you would only be able to go to on a special occasion.
Don’t let these moments get you down.
The comparison trap
First, you’re probably overestimating how much money other people have. A friend may have skimped on lots of other possessions to own that car you’d love to have. Or perhaps that friend went into debt to buy it. As my dad always said, “It is dangerous to count other people’s money from what they have.”
Second, you’re probably discounting all of the things that you already have when you make that comparison. Your desire to own a particular car or go on a vacation leads you to pay attention to those things you want but don’t have. The things you already have and have already done just form the background of your life, so you don’t give them as much value.
Finally, even if you get the car or go on the vacation, that isn’t going to make you happy for long. Achieving any goal has only a temporary influence on your happiness. Work on the hedonic treadmill points out that whenever you achieve a goal (or make a new purchase), it makes you happy for a while. But then you focus on the next goal you want to achieve, and that unfulfilled goal makes you dissatisfied.
The motivating power of dissatisfaction
Dissatisfaction is actually a good thing, because it gives you the energy to act. Wanting something creates motivation. But dissatisfaction alone can be frustrating. So it is important to avoid dissatisfaction over things that you cannot do anything about. Making upward social comparisons that count other people’s money creates that kind of unproductive dissatisfaction.
Instead, the next time you feel yourself going down that road, make a gratitude list of all the things you have that bring you joy. That will return your focus to all of your own successes and away from the things other people have that you don’t.