You Think You’re Doing Fine in Life, Until You Hear a Friend Is Doing Better

We tend to measure our financial health based on our friends—and what they post on social media

By Julia Carpenter of The WSJ. Excerpts:

"How we measure up against our friends and peers has an outsize effect on our financial perception, economists and researchers say—especially as people spend more time scrolling social media. These comparisons can make our finances seem inadequate even when things are going fairly well. 

This effect is playing a part in the disconnect leading many consumers to feel dour about the economy despite several promising factors, such as cooling inflation, a strong labor market and a U.S. economy that grew 3.1% over the past year."

"many of them [friends] present only the rosiest view of their finances and families on social media."

"Around a quarter said they feel less satisfied with the amount of money they have because of social media, and a third said they have spent more than they could afford to “keep up with the Joneses” on Instagram and other apps."

"Time on social media creates more opportunities to feel bad about ourselves and our financial picture, said Isabel Barrow, director of financial planning at Edelman Financial Engines. The survey found a strong link between overspending and time spent on social media, Barrow said."

"New research shows we are also always calibrating how high our perceived income is relative to them [those we know], too."

"People [from a study] were happier when they thought they were doing better than their peer group. When they felt that they were at the top of this ranking, they felt less need to branch out and make other comparisons."

"Social media sometimes gives people the false impression that your sphere of influence is larger and more diverse than it actually is"

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Federal Reserve Economists May Have Discovered Another Cause Of Bankruptcy (2016) (if a neighbor wins the lottery people start spending more on consumption to keep up) 

China's Government Cracks Down On Displays Of Wealth On Social Media (2022) 

Are TikTok influencers changing consumers' tastes? (2023)

Is Venmo Affecting Friendships? (2017)

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Would You Pay $250,000 To Get Your Friends' Respect? (2011)

Excerpt: But here is something interesting about one student, who is now $250,000 in debt:

"Mr. Wallerstein, for his part, is not complaining. Once you throw in the intangibles of having a J.D., he says, he is one of law schools' satisfied customers.

"It's a prestige thing," he says. "I'm an attorney. All of my friends see me as a person they look up to. They understand I'm in a lot of debt, but I've done something they feel they could never do and the respect and admiration is important.""