More Money Might Not Satisfy You

Chevy Chase

Get that man some Tylenol!

“The best things in life are unexpected – because there were no expectations.”
–Eli Khamarov

I’m not a planner by heart. I like spontaneity. Sure, I plan for the long term, but when it comes down to what I’m doing this weekend, I usually don’t have plans. However, when I do make plans, I find that I get them set in concrete in my brain. Once I have an expectation of what is going to happen in my mind, if it doesn’t, I’m a wreck.

Although I don’t really go looking for psychological terms with which to tag myself, I’m apparently a sufferer of neuroticism. At least, according to a study conducted by Eugenio Proto and Aldo Rustichini, I am.

The key findings in this report show that, in general, if you’re not particularly successful financially, as measured by income, then you tend to underestimate how well you’ll do in the future. On the other hand, if you have a higher income, you tend to overestimate how well you’ll do in the future.

For these people, when it comes to raises, it’s all about the expectations game.

Since their expectations are so low, lower income people are pleased with raises that they get, particularly because the raises tend to be better than what they expected. The high earners, though, are usually disappointed with the raises. Even though they got more money, they wind up being dissatisfied because they had expectations of getting even more money. They also tend to overestimate the impact that the raise will have on their lives, and are subjected to a psychological phenomenon called the impact bias, meaning that we overestimate how future events will actually affect us.

Think about Clark Griswold in the movie Christmas Vacation. Clark was expecting a nice fat Christmas bonus to pay for his pool. When he only got a subscription to the jam of the month club, he was furious, launching an epic tirade (you can Google it for yourself). Even though he did receive something, since he had much higher expectations for what he’d get, he was seriously let down.

Clark Griswold, too, was a sufferer of neuroticism.

What can those of us who suffer from neuroticism do to prevent ourselves from being disappointed in the future?


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  • Set realistic expectations. If you have no expectations, they cannot be let down. As the old saw goes, prepare for the worst and hope for the best.
  • Put yourself in control of your future. Are there things you can do to increase your income so that you are not dependent on raises in the future?
  • Have the critical discussions as early as possible. Even if you’re not talking about raises, you should get feedback on your performance so that the end of the year review is not a surprise and you have a really firm idea of where you stand.
  • Gather evidence. Know what others in your industry and your position are being paid. Know how much value you are bringing to the company. Provide ideas to improve your worth to your employer. Tie in what you do to what your boss is measured on.

Set yourself up for the upside surprise. If not, you may find that you have more, want even more, have hopped on the hedonic treadmill, and need some Tylenol.

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About Jason Hull

Jason Hull is a Fort Worth financial advisor. Before becoming a Fort Worth financial planner, Jason co-founded, built, and sold a software development company. He is a CFP candidate, has a MBA from the University of Virginia, and a BS from the United States Military Academy at West Point. He is the owner of Fort Worth financial advisor Hull Financial Planning.

Comments

  1. I’ve actually had this happen to myself. Not only have my expectations for raises gotten carried away, but so did my expectations for bonuses as well. And it was a big let down when they were not as I had thought. Like you said, I’ve gone to psyching myself up for an upswing rather than a let down by not having such high expectations.

    • Hey! Thanks for dropping by and commenting!

      Not getting yourself psyched for bonuses is much easier said than done. I think it all stems back to the traumas of homecoming and prom dances in high school when we got ourselves psyched up for getting the homecoming queen to be our dates and it never happened. OK. Maybe that was just me! :-)

      I think that planning as if you’re not going to get a raise/bonus and actually walking through the budgeting exercise of maintaining your lifestyle and avoiding the hedonic treadmill will help center and ground you to keep some expectations in check.

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