As humans, we're very good at putting on appearances, even when they don't match our reality. If we have a lot of money, we can appear as if we don't. If we are just scraping by, we can “put on a good show” and try to appear more affluent than we are. Unless your neighbor gives you a peek into his investment portfolio, it can be really difficult to tell how they're doing financially.
The disconnects are even bigger when trying to wrap your head around the finances of someone who is worth many times more (or less) than you are. The financial decisions they make, or don't make, are completely different, because their context is completely different.
Shutter a $125 million acquisition
In the July/August 2014 issue of Inc. Magazine, there's a brief article on DailyCandy, a email newsletter that featured one great shop or product a day. DailyCandy launched in 2000. Dany Levy, the creator, sold it to the likes of NBC and Comcast for about $125 million in 2008.
In 2011, NBC and Comcast shut it down. Levy was “shocked, dumbfounded” when she found out. (Rightfully so, no doubt.)
What struck me was that $125 million is a life-changing amount of money for nearly everyone. Only about thirty thousand people worldwide are worth this much. This isn't just the 1%. This is the top half of the 0.001%!
But even as big a purchase as this was, it wasn't so big that it couldn't be shuttered by an even bigger corporation.
You know what happens when you assume …
This is a reminder that context is incredibly important. If you aren't experiencing, or haven't experienced, that level of wealth, you just don't know. Further, the series of financial decisions you've made are different than the ones your neighbor, your colleague, your parents, or your boss made, for better or worse.
Some other examples:
- Nearly all Americans, on a global scale, are rich. If you worked 40 hours/week, 50 weeks/year, at minimum wage ($7.25/hour), you'd be in the top 9% globally. Even someone earning one-quarter of poverty level in the US — $3,000 per year — is within the top third globally.
- Even setting that aside, people who have always been middle-class don't “get” poor. It takes someone who has been, or is, to gather the courage to try to explain it in words, and it's eye-opening.
- The same with being homeless. It wasn't until I helped a homeless person briefly that I got even a glimpse. And even then, I went back to my home and my wife afterwards.
- Or completely buried in debt, or unable to get a loan. This is why Dave Ramsey can speak so powerfully on getting out of debt. He's been there, even if he no longer is there.
- There's myopia all around. Gwyneth Paltrow can act — no question. Even her country music isn't bad. But when she recommends a miniskirt that costs a good-sized middle-class paycheck to her fans, who likely are middle-class-ish, said middle class does a big giant facepalm. But for the things we see, there are other parts that we don't, so I'm sure there are unique rough spots that come with that territory, too.
All of this to say: What you have, or what you owe, only makes sense in the context of your life. Placing your personal finances on top of someone else's context just doesn't compute. So make financial decisions in your context, not someone else's.