Why Comparing Finances with Peers Can be Misleading: What to Do Instead

Pilots are trained to think logically, assess unexpected changes, and make decisions that keep their flight on course to a safe landing. But what happens when you apply this same mindset to your financial life? Is there a reliable benchmark to know if you’re on track for retirement or your other goals? And can comparing your finances to those of your peers really tell you if you are where you should be?

To help illustrate this concept, imagine you have a 100-piece puzzle and that you compare just 10 of your pieces to 10 of someone else’s. How accurate can this comparison truly be? Without understanding the full picture of what success looks like and the other components of their financial landscape, you risk arriving at misconceptions at best – or worse, losing your own sense of joy and contentment. The truth is, each pilot’s journey is unique, with layers of complexity that may or may not be revealed during a short cockpit conversation. 

Cockpit Confusion: Limited Visibility

Picture this hypothetical scenario: you go to work after spending the weekend at a local getaway with the family. Spirits are high, contentment and joy are the name of the game. “Anything exciting lately?” your captain asks. You proceed to tell him all about the great time you had with loved ones, and how fortunate you feel to have had those experiences. Before you can finish, the captain starts talking about plans of traveling to Europe during the summer, shows you a picture of their new car, and brags about closing on their new vacation home. Before you know it, you think: am I falling behind? How can they afford all of this? As the conversation continues, you find out they have significantly more than you in their retirement plans, and slowly but surely you come to the conclusion: yes, I am in fact falling behind.

Do any of those thoughts sound familiar? Allow me to introduce you to a different perspective. Although your captain has a much bigger chunk of money in retirement accounts, those funds are all pre-tax while yours are all after tax. They also have a significant amount of consumer and credit card debt, while you are debt free. You also have a significant military pension for retirement and live in a place with a much lower cost of living. Do you see how the more pieces are added to the puzzle, the better you can understand the full picture? In this scenario, you may actually be “ahead” when it comes to finances. And that doesn’t even include other aspects of life, such as your mental and physical health, family, friendships, and sense of purpose. 

Turbulence Ahead: The Psychological Trap

In addition to the misleading “conclusions” that result from incomplete comparisons, there is another side effect that goes beyond your wallet: your psychological well-being.  A 2022 scientific study published on the National Library of Medicine titled “The Relationship Between Financial Worries and Psychological Distress Among U.S. Adults,” found a “significantly positive association between financial worries and psychological distress.” What may not be as obvious is that the study focused on the subjective aspect of financial concerns – not the objective reality. In other words, a negative perception of your financial status alone, regardless of its accuracy, can negatively affect your mental health and, in turn, many other aspects of your life.

You may be thinking, “Fair enough, but if not through comparison, how can I know if I’m where I’m supposed to be financially?” That’s a great question—one with many layers. First, let me offer an abstract answer by quoting one of my favorite authors, John Maxwell, an internationally recognized leadership expert and author with over 19 million books sold. In one of his books, “The 15 Invaluable Laws of Growth,” he writes: “Comparing yourself to others is really just a needless distraction. The only one you should compare yourself to is you.” So how can you apply this idea in the real world of financial planning? Here’s some practical guidance.

Define Your Destination

Have you ever heard the quote “If you don’t know where you are going, any road will get you there”? I cannot fathom a greater sense of confusion than for a pilot to try to evaluate if their flight is on course if the destination is unknown. So, to answer the question “am I on track?” you must first know… on track for what?

For one pilot, “on track” may mean being able to travel with the kids while they are little, contribute to their college education, and have enough free time to enjoy making family memories. For another, it may be retiring at age 55 so they can backpack across the world, experience different cultures, and help financially care for their aging parents.

Once your destination is clearly defined, and a timeline and dollar amount are established, it becomes possible to “reverse engineer” those goals and create a plan to achieve them. I personally use the “SMART” method to help make my goals more concrete – it stands for Specific, Measurable, Achievable, Relevant, and Time-bound. Alternatively, the opposite can also be done: if I continue doing what I am currently doing, where will I be in 5, 10, and 15 years? How do I feel about that future reality?

Smooth Landing: Arriving Confidently

Now that you have the plan that needs to be followed, all that is left is to keep it on track as it weathers different circumstances: do I have enough insurance and the right types? Is my estate plan aligned with my values and wishes? Those are all important questions to consider.

At Leading Edge Financial Planning, we understand the unique challenges pilots face. Our team helps aviation professionals build personalized, actionable financial plans, while helping clients clarify their goals, optimize resources, and create a plan for the future.

Above all, remember this guiding principle: the best pilots are not the ones who travel at the highest altitude or fly at the fastest speed, but the ones who ensure the plane arrives safely at its destination.

All the best!