Josh Hastings and his wife Lauren are facing student loans of almost $300,000.
Hastings, 31, a teacher in the suburbs of Washington, D.C., and Lauren, 30, a physical therapist, recently decided it was time to get serious about paying off their student debt after she completed her doctorate. Their first priority: Stop worrying about what others thought about them.
“It’s really easy to get caught up in that lifestyle of comparing yourself,” Hastings said. “You might think people really care about what you’re doing and how you’re living, but people are not thinking about you as much as you think.”
The couple put that idea into practice, he said. They said “no” to attending weddings and bachelor parties they couldn’t afford, and they kept their own wedding to just 80 people. They don’t regret it. “You have to worry about your own happiness, ultimately,” Hastings said.
That is sometimes easier said than done. Money remains an off-limit subject in many social circles, but technology is making it easy to compare yourself to others, and not just on Facebook FB, +1.32% There’s a slew of new companies that aim to help people save and spend by comparing themselves to their peers.
Status Money debuted in September 2017, to help people save by turning the old adage “compare and despair” into something more productive by lifting the veil on other people’s finances. Majd Maksad, the company’s founder and CEO, said he came up with the idea while working in the analytics departments of companies including Citibank C, +0.91% and Discover DFS, -0.51% “Most people have no idea what similar people to them are paying on a student loan,” he said.
While traditionally consumers only had access to information about themselves, on Status Money, people can compare themselves to a group of anonymous peers (which Status Money compiled in partnership with financial institutions), seeing others’ interest rates on their debt, and their spending and saving habits. Are you spending more than others on restaurants, vacations or even your monthly rent? How much have you saved compared to others? Have you invested in the stock market?
That last question is crucial for those planning for their retirement. For instance, roughly 80% of Americans don’t own any stocks, a recent study by New York-based annuities company Benjamin found. Just 5% of households between the ages of 20 and 24 have any stocks outside their retirement accounts, compared to about 17% of those ages 30 to 34.
>See how you stack up financially against other people who went to your college SoFi, a company that helps people refinance their student loans, also offers a “social comparison” feature for members who have the same income, age, level of student debt or even those who attended the same university. Honeigh Strickland, a certified financial planner and the marketing lead of membership at SoFi, said seeing how others are doing financially can be “extremely motivating” for its 500,000 members.
Benjamin, a New York-based company that sells annuities, recently analyzed consumer data from the Federal Reserve so its customers can see how their checking account balances — and the interest they’re making on them — measure up.
The goal: Show people they could be doing better, said the company’s founder. “Banks really benefit from people forgetting that they’re not being paid interest in their checking account,” said Sam Abbas, the company’s founder.
People who realize they’re spending more than peers will cut backStudies suggest peer pressure can work both ways. Consumers who realize they’re spending more than their peers—those who are of similar ages, incomes, locations and credit scores—will actually cut back on their spending, researchers at the University of Chicago’s Booth School of Business and the University of Maryland’s Smith School of Business concluded.
Another study at Duke University’s Center for Advanced Hindsight found similar results. Members of an Arizona credit union in 2017 were given the chance to see how their spending on restaurant meals compared to their peers. Many mistakenly had assumed their peers spent more than they did, and when they found out otherwise, they reeled in their own spending.
>Consumers get motivated; the companies get their data Of course, these companies also benefit from gathering data on their customers’ spending and saving habits. Status Money, for example, invites members to link their bank account, credit cards, student loans and credit reports, to the service. The company never sells the data, Maksad said, and makes its money when consumers sign up for financial products the site recommends, like credit cards.
Abbas said Benjamin carries out studies of consumer behavior and their finances to educate the public, and said it doesn’t sell the data to third parties. But the company does cite these studies in blogs and, in theory, increases traffic to the site where readers can also buy annuities.
Similarly, SoFi uses social comparison services to draw potential customers who are interested in refinancing their student loans, as well as career counseling and additional loan products. The company also plans to debut an “advice” feature later this year, Strickland said.
Hastings, meanwhile, said you don’t need an app to compare your finances with those of others. He regards other people’s extravagances as a way to motivate himself, rather than feel bad about what he doesn’t have.
He resists clicking on other people’s vacation albums on Facebook. “Pick someone out that’s where you want to be or where you want to go, and strive to be there,” he said.
