The Danger of Anchors

Humans naturally learn by imitating the behavior of others. This is how we learn to walk and talk and behave when we’re babies. We learn from our parents and we imitate their speech and actions. This is an extremely useful evolutionary trait because it allows us to understand how to communicate with others and what cultural norms to follow. It allows humans to learn extremely quickly just by copying the behavior of others, and this learning often takes place subconsciously.

This evolutionary trait is a two edged sword.  Although it is a powerful tool we can use to enhance our learning and understanding of the world around us, it can cause us to unknowingly copy the behavior of those around us. This can be dangerous in the consumer-oriented society we live in.

When we decide what type of clothing we want to wear and what type of vehicle we want to drive we subconsciously look around at the people who live and work with us. I call these people our anchors. We subconsciously use them as an anchor to let us know how much we should be spending and what type of lifestyle we should be living. Consider a computer programmer who earns $60,000 per year. Every single day at work he is surrounded by other computer programmers. They drive new cars to work and they buy lunch every day. This is the normal behavior for someone earning their salary. It doesn’t seem outlandish or unnatural at all. Everyone at this job is doing it.

For a new programmer who first enters into this job situation he doesn’t need to be told how to act – he subconsciously begins to act in a manner similar to the other programmers. He simply copies what is considered normal. Don’t pack your lunch. It’s too much of a hassle. Buy lunch at some place nearby. Don’t keep driving that 5 year old Honda civic, you make big money now. Buy a new SUV.

We copy the behavior of those around us. But we don’t need to explicitly be told to copy this behavior. WE DO IT NATURALLY. This might not seem like a big deal but it is. This phenomenon will keep you from reaching financial independence. It will slowly cause you to sink into the consumerism society we live in. The most dangerous part of this type of behavior is that we typically aren’t aware that it’s happening.

When we see celebrities and other famous people on TV gain recognition for a new show or movie they’re in and we see them pulling up to award shows in fancy cars we think it’s pretty impressive but it doesn’t make us go out and buy a new fancy car to compete with them. We might like to be in their position or have their wealth but we don’t really care what they own or what type of life they live. Why is this? It’s because as humans we naturally compare ourselves to people we know – people we see in our everyday life. We compare our salary to our siblings and parents and cousins and best friends. We compare our house size to our friends and family and people we come in contact with every day. People that are part of our lives. These people are our anchors.

If our anchors spend 90 – 100 % of their income and buy a new house and upgrade their wardrobe whenever they get a new job or a promotion we are in deep trouble. Why? Because we observe this behavior. We mimic this behavior. If our anchors increase their lifestyle and their expenses we subconsciously raise the standard for what we consider to be the new normal. We don’t care if celebrities buy a new mansion, but we do care if our best friend buys a new Land Rover. We see our best friend regularly. We interact with them. We subconsciously compare our life to theirs. If they buy a new fancy car the probability that we will buy one in the near future skyrockets.

So how do we prevent this behavior? By recognizing it when you see it. Recognize that your spending does not have to be highly correlated with the spending of your anchors – your friends, family, coworkers, people you see on a daily basis, etc. Recognize the fact that it is our nature to compare ourselves to those around us. Before you make a purchase, no matter how small or large it may be, question why you are making that purchase in the first place. In many cases you may notice that you are buying new clothing or a new accessory because one of your anchors has something very similar to it. Ask yourself if you are spending your hard earned money on something because you genuinely want it or because it seems like the normal thing to do for someone in your income bracket.

Recognize the spending behaviors of the anchors in your life. Then observe your own spending behavior. You might be startled to find that your behavior is eerily similar to theirs. This can be dangerous if you are blindly spending money on things simply because your anchors are. Spending money isn’t a bad thing as long as you’re spending it based on your own wants and needs and not just because “everyone else is doing it”.

Feature Photo Credit: anchor

2 Replies to “The Danger of Anchors”

  1. Great observation. Part of the reason I keep my 2001 vehicle is to help others anchor to less expensive vehicles (depreciating assets). I feel like this is also a great example for young people. Unfortunately I didn’t manage that with my house.

  2. Good one! I found myself doing this right when I got out of school. It was hard to do but I broke the habit with the help of my wife. Now we have had the same vehicles for the last eight years and don’t plan on getting anything new until one of them is to expensive to keep repairing. Be interested in what others think as well.

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