5 Reasons You Feel Financially Behind Your Peers — and How To Get Ahead

Worried woman manage finances

Money can make us all feel different ways at certain benchmarks in our lives. When you are younger, chances are you and your cohort all feel like you are in the same boat or at least riding similar waves: working multiple jobs, trying to live frugally, getting a place with friends and roommates to save on bills.

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But as you mature and get older, you might see that lots of your peers have jumped ahead into high paying careers, buying property and investing in opportunities to increase their wealth. Are you still on the same level or falling behind?

“In today’s day and age, we are often comparing ourselves to our peers,” said Melissa Murphy Pavone, Director of Investments at Oppenheimer & Co. Inc. When it comes to finances, there is no comparison. Each individual’s finances are personal and specific to them.

There is no rule of thumb for how much money you should have saved at a certain age. Financial freedom means different things to different people.”

There are reasons the lower and middle class do not become wealthy, but they are not all encompassing or forever binding. In fact, there are ways to not only catch up with your peers, but to surpass them over time.

Tired of being last place in the financial rat race? Here are five reasons you feel financially behind your peers and a few ways to get ahead from some personal finance experts who know a thing or two about investing in oneself.

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Not Having an Emergency Fund

Life is full of unexpected twists and turns, with many of these curveballs proving to be very expensive. You do not want to have to drain your savings or put all of these surprises, which is why it’s important to have an account of money set aside for the worst case scenario.

“You need an emergency fund,” Pavone said. “You need to expect the unexpected. Have six months of expenses earmarked in a high yield savings account.”

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Living Above Your Means

No one wants to live a poor life, so many of us overspend and exceed our monthly expenses budget to try and have a taste at the good life. That can feel good at the moment, but terrible once the final bill arrives and you find yourself going into debt over a vacation or a party.

“The secret to building wealth is living below your means,” Pavone said. “You need to be clear on the income coming in and the expenses going out. Pay yourself first. The results of compound interest are powerful. As your income increases lifestyle inflation creeps in.”

“Avoid the urge to spend more as you make more. Save more. Invest the difference. Your future self will thank you,” she said.

Neglecting Retirement Savings

For most of us in the working world, retirement can feel like it’s far away, something that our future selves — not the present “we” — have to worry about. This might be half true, if only a fruitful retirement did not depend on saving today.

“If your company has a retirement account, enroll,” Pavone said. “If they don’t, open an individual retirement account or IRA. By maxing out your retirement contributions you are building a solid financial foundation for your future.”

Pavone went on to point out that “[w]hen over the age of 50, individuals should take advantage of the ‘Catch-Up Contribution.’ Not only will this boost their retirement savings but could possibly be tax advantageous. Catch up contributions offer a valuable opportunity for individuals over 50 to accelerate their retirement savings and secure a more comfortable financial future. If your company offers a company match, make sure you take advantage of it.”

Managing Your Money Without a Budget

The personal finance math seems simple at first: you make money, you spend money. That’s easy addition and subtraction. The problem is that you have not accounted for your expenses, which means you are oftentimes spending more money than anticipated, a fatal move that will keep you in debt, poor and struggling to pay your bills.

“Failing to make a budget and keep track of your expenses can lead to overspending and financial disorganization,” said Michael Collins, chartered financial analyst (CFA) and founder and CEO of WinCap Financial.

“Without clear financial goals, it’s challenging to make progress and achieve financial stability,” Collins said. “Not having a plan for debt payoff — paying off debt can be overwhelming, but having a plan and sticking to it can help you become debt-free and improve your financial health.

Each month, track your spending, anticipate your upcoming bills, pay off your living expenses, set aside some money for a rainy day and stick to a plan that fits your lifestyle.

Not Asking for Help With Finances

Personal finances tend to be a private matter most of us would rather not discuss with our friends, extended family, neighbors, colleagues and the average person on the street. This creates an atmosphere and mindset that talking about money is a bad thing, especially when you could use some help. Lots of people bottle up their questions and worries until their finances spin out of control and it’s late in the game to steer them back on course.

“As a certified financial planner or CFP, I can’t stress enough the importance of working with a financial professional, especially for planning for Financial Freedom!” Pavone said.

“A CFP can provide personalized guidance tailored to your financial goals and risk tolerance, helping you navigate the complexities of the market and help answer the million-dollar question: How much do I need to save to be financially free?”

“Saving can be daunting,” she said, “but it’s imperative to plan ahead. There is no one size fits all answer for how much you need to save for Financial Freedom.”

Pavone said that “everyone should have an established emergency fund, a clearly defined budget and a retirement account” if they are looking to not feel financially strapped compared to their peers, but leveling up their personal money game.

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