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This week, Nathaniel asks:
Why does it seem like the more money I make the less money I have?
There are three possible reasons that come to mind, and all of them are about choices. I’m guessing from your question that you would like to have more of the money you make. So no judgment here. You just have to decide what your priorities are.
One reason is lifestyle creep. There’s both an emotional and a practical side to this.
When you start making more money, you can afford nicer things and a more affluent lifestyle in general. If your parents bought your back to school clothes at Goodwill growing up, as an adult it can be very tempting to splurge often on designer fashion. You don’t want to feel deprived, and having all those nice things proves that you aren’t. And if you hang out with spendy friends, before you know it, you can drop a couple of hundred dollars in a weekend just going out after work on Friday and then onto Sunday brunch. Dammit, you work hard — you deserve this weekend at Cabo.
The practical side is that working the kind of jobs that pay large salaries means you don’t stop work at 5pm. You’ll be spending such long hours working that you’ll need to pay other people to do the stuff you don’t have time to now. Grocery shopping, cleaning, errands, walking the dog, child care — the cost of paying others to do these things adds up. You’re buying back your time and you’re spending more of it working. Are you ok with that tradeoff? There’s no right answer, just personal preference.
Even in jobs that don’t pay a high salary, there can be associated costs such as commuting, eating more take-out/restaurant food, ‘professional’ clothing, and child care. This is the reason some new parents decide to stay home rather than be employed in a low wage job, especially a job that requires being in the workplace full-time — it doesn’t make financial sense when the job will end up costing more than they would earn.
Another reason is that you’re not being intentional with your money. I dislike the word ‘budget’ because it immediately makes me feel deprived and that I’ll never be able to buy gelato on impulse ever again. But I do have a spending plan, which I’ll be sharing at a future date.
Every month, I know how much I’ll be spending on essential costs, like housing and utilities, debt payoff and savings, and then fun stuff like gardening. The simplest plan a lot of people use is the 50-30-20, with 50% of your monthly income going to essentials, 30% to discretionary costs like groceries and fun stuff, and then 20% to savings and debt payoff. Between inflation and wage stagnation, that might look more like 60-20-20 currently.
The point is to plan ahead for large expenses like a car or a vacation instead of using credit, and to save something every month for unexpected expenses. (Trust me, something that costs money will happen, you just don’t know when. Also, owning a house and/or having kids is probably going to cost more than you realize. So really plan ahead for those.)
Finally, some of us tend to be over-givers. Generosity is a beautiful quality, and when it comes from a place of abundance, it feels light and joyful. We may be financially supporting causes or people we care about. It’s admirable, and at the same time, it’s important to consider whether you may be over-giving. If our own financial needs are not being met, we can become exhausted, resentful, or feel that others owe us something in return.
While there can be many reasons (all of which make emotional sense) for having less money than you think you should, given your income, it comes down to the choices we make. Spending always has an opportunity cost. If I spend $20 on this, I can’t spend the same $20 on something else. Plus, I traded my time and life energy to get that $20, so whatever I spend it on has to be worth it to me.
What works for me is spending less on the stuff I don’t care about, so I have more for what matters to me. For example, I work remotely and mostly wear jeans and a black shirt to work every day. Spending less on my professional wardrobe allows me to spend more on the stuff I do care about. Currently that’s contributing to my Roth account and on plants for the garden. Being clear about my goals helps me be intentional and make thoughtful choices with my spending.
Remember, it’s not how much you make — it’s how much you keep. Learn from the examples of Ronald Read and Lady Gaga.
What’s on your mind?