❝There is no growth in the comfort zone.❞ -Jocko Willink
Kris grew up in poverty but now finds herself in a very successful career. Her bonus last year was more than her entire salary 10 years ago. She makes more than all of her family members and close childhood friends. She doesn't know how to behave when she goes home to visit. If she goes out with her friends, she's not sure if she should suggest a less expensive restaurant than she would usually go to so that her friends can afford to come with her. Or, she wonders if she should choose a more expensive restaurant and pay the bill. She's worried about what her friends will think of her. She's learned that her family makes fun of her success, using her as the butt of their jokes. Unsure how to handle this new situation, she gives a lot of her money away. It feels like she's doing good in the world. She's helping people get out of debt; she's funding her friends’ business ideas; she believes she's being charitable. Unfortunately, she doesn't have anything to show for her success. She's broke.
Mike grew up very wealthy. He never even knew that there were people in the world who struggled with money. Anytime he wanted anything, his parents would get it for him. He started to believe that he deserved anything he wanted, including his own business. He went off on his own, thinking it was easy to run a successful business, but the business never paid for itself. He has burned through most of his savings and all of his inheritance. He can't afford his lifestyle, but he still keeps up appearances. He still thinks he deserves a certain lifestyle. Unfortunately, he never learned how to get by on less. His lifestyle is not sustainable.
Financial Comfort Zones
We all have a financial comfort zone. A financial comfort zone is a range in which we're comfortable with money, either income or wealth. It's intuitive to think about having a lower bound on our finances. Not having enough money is, in fact, what many people believe to be their biggest financial hurdle.
It's less intuitive to think about there being an upper bound on our comfort zone. It's not intuitive because many of us believe more money will make our lives easier. It's hard to imagine there would be too much money. Having said that, you may know people who have a lot of money but aren't happy. Indeed, many of those who have come into money with the belief that money would make them happy find out that it does not. In many ways, this makes them less happy than they were before. You've probably heard of many examples of celebrities, sports stars, or lottery winners who came into a lot of money and then ended up losing it all, or worse.
A financial comfort zone dictates how we define "rich people" and "poor people." Rich and poor are very subjective terms. Somewhere out there is someone who would call me a poor person. Somewhere else out there is someone who would call me rich. Rich and poor are relative to where we are.