This paper examines the relationship between subjective well-being (SWB) and meeting
one’s wealth expectations using panel data from the National Income Dynamics Study of
black South Africans. We distinguish between internal comparison effects (meeting one’s
own prior expectations) and external comparison effects (perceived relative income stand
ing) to understand how different forms of relative income influence well-being. Using
fixed-effects estimation to control for time-invariant individual heterogeneity, we find that
meeting or exceeding wealth expectations is associated with statistically and economically
significant increases in SWB. These magnitudes are comparable to the well-established
effects of household asset ownership or strong religious beliefs on well-being. The per
sistence of these effects after controlling for current income levels and perceived relative
standing indicates that internal temporal comparisons represent a distinct channel through
which economic circumstances influence well-being. Our results provide novel empiri
cal evidence that backward-looking expectations serve as important reference points for
evaluating current circumstances. The findings suggest that anti-poverty programs generat
ing sustainable income growth may produce larger welfare gains than one-time transfers
by allowing individuals to consistently meet or exceed their evolving wealth expectations.
This research enhances understanding of how relative economic standing shapes well
being in developing country contexts and demonstrates that helping individuals form and
achieve realistic economic expectations may be as important for welfare as addressing
objective economic inequalities.