- Financial benchmarks — like how much you should have saved or invested by a certain age, or when you should own a home — can feel suffocating.
- As someone who has been “behind” at certain points in my life, I’ve experienced shame and guilt because of arbitrary financial benchmarks.
- Now, though, I’m focused on setting my own personalized benchmarks, like maxing out my retirement account and fully funding my emergency fund, and I feel great about it.
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Financial benchmarks can make personal finance seem like a win-or-lose game with only one route to success.
You shouldn’t rent in your 30s.
You should have twice your salary saved or invested by 40.
You should retire by age 65.
I used to play a lot of board games when I was a child, and I was such a sore loser.
My favorite game was Sorry, but only if I won. The winner of the game has to get all their pawns around the board and back to the home area before anyone else. During the game, you can switch places with your opponent or bump them back to start to slow them down.
Once you fall behind in the game and your opponents start moving pawns to their home space, your chances of catching up and winning get slimmer.
To me, financial benchmarks work the same way: If you don’t have real estate in your name by a certain age or twice your annual salary invested by age 40, you’re already “behind” in terms of financial success.
If you don’t hit the mark by the predetermined time or age, it almost devalues any experience or financial progress made leading up to that point. When I look at financial benchmarks and realize that I’m “behind,” my first thoughts are: What did I do wrong? And, How do I catch up?
To top it off, all the financial rules of thumb I’ve seen don’t have any realistic alternatives, which turns them into a case of the haves and have nots.
Shame and guilt didn’t help me fix my financial issues
As a former single mom and teen mom, I already felt very behind (at an early age) in terms of being able to manage my finances well and earn and save more money. Seeing financial benchmarks stating what I was supposed to have accomplished by age 25 and 30 didn’t help my confidence level and actually made me feel more shame and guilt surrounding my financial situation.
While I don’t pride myself on making excuses, it would be irresponsible to ignore the income disparity my parents faced when I was growing up, my family size as a child, the area of the country I lived in for most of my life, access to personal finance education, or other important factors that could impact my ability to reach certain financial milestones.
I’m not the only one who feels like widespread financial benchmarks could cause more harm than good when it comes to reaching your money goals.
“I think financial benchmarks are generic advice and hardly make sense for most people,” said Eric J. Nisall, an accountant and author of the Understand Finances blog. “I’m single with no kids and in my 40s with a mortgage and a business. Comparing me to someone who is in the same age range but has a part-time job, spouse, and children while renting makes zero sense.”
My personal situation is quite different from Nisall’s, so it makes sense that we shouldn’t follow the same financial benchmarks.
What I’m doing instead
I’m still just under 30 but feel no desire to keep up with or even pay attention to certain financial benchmarks. That in itself relieves a boatload of stress for me.
I understand how some of these rules of thumb could be based on actual numbers. For example, I really do want to retire comfortably by 65 or even earlier. But instead of comparing my path to financial benchmarks, I’ve focused on setting very specific and personalized, smaller goals that I can tackle each year.
I also don’t beat myself up when I can’t reach my wild and audacious goals or it takes longer than expected. When years are hard or overwhelming, I slow down and give myself some grace. When money is flowing and I’m able to keep expenses low, I go full force on saving as much as I can and moving toward my short and long-term financial goals.
I’m creating my own financial benchmarks
Do I feel bad about buying a home before having six months of expenses saved up? Or am I beating myself up about this being the first year I’m able to max out one of my retirement accounts? Absolutely not. I’m creating my own personal financial benchmarks and trying to establish better habits while working with what I do have.
I don’t want to be limited by financial benchmarks or shamed for not reaching some of them, so I stick to living on a percentage of my income and putting the rest toward my goals. Ultimately, I know my husband and I can live comfortably on around $40,000 per year. This may or may not work for other people. But for us, we know that anything over that could go toward saving, travel, investing, fun purchases, or whatever else we want or need.
As income or our cost of living changes, I can alter my savings percentages and just keep raising the bar (or lowering it) since I’m no longer trapped in that box created by popular financial benchmarks.
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