Why Higher Income Doesn’t Guarantee Financial Success
During my three plus years as a personal financial blogger, the majority of interaction with the public has been overwhelmingly positive. However, there are always those who like to throw out how easy it must be for us to pay off debt, save for retirement, accomplish any financial goal because we make decent income. I know you’ve heard it or though it too. If I could just make x amount of dollars, my worries would disappear. In reality, higher income doesn’t guarantee financial success and here’s why.
Higher Incomes Often Mean Higher Expenses
While it’s possible to live like a broke college student forever, some lifestyle inflation as your income grows is inevitable. I used to happily stay at Motel 6 and eat cheap pasta and red sauce for just about any meal. As a forty something adult, the quality of travel and groceries that are now acceptable are just a couple of things that have gone up in price. I’m not sure if it’s having a higher salary or just being a grown up, but many of the cheap things that used to suffice don’t work anymore.
Spending More Than You Make Results in Debt
Whether you make minimum wage or a million dollars a year, when you spend more than you make, it results in debt. Sounds simple, but with multiple ways of financing any purchase, it’s easy to get caught up in the cycle of instant gratification by thinking the payment doesn’t sound too bad. Before you know it, payments take up your entire income, and it takes more and more credit just to get by.
While many lower income people don’t qualify for credit, high earners almost always do. Even Kanye West says he is millions of dollars in debt and needs help from Mark Zuckerberg. The billionaires and politicians of the world are not there to support your spending habits. Start spending less than you earn and the rest will fall into place.
How to Guarantee Financial Success
Financial success is not guaranteed by high income. What causes one to succeed financially is the ability to control income, mindful spending, and using money as a tool to achieve your goals. Spending every dollar right away is not the way to achieve success.
- You need enough money to cover basic expenses with some leftover to save. If your job does not provide that, then make more money.
- Pay off all consumer and high interest debt.
- Build up an emergency savings account so credit can be avoided if something goes wrong.
- Invest enough to be able to retire comfortably.
Use what is left for things that bring joy or value to your life at the appropriate time. I would love to have a number of things right now, but that would take away from some of our other financial goals. Knowing when to spend is almost as important as having money to spend.
Of course, having a high income does help accelerate financial goals, but it certainly does not guarantee success. The next time you start to think about how just a bit more money would make everything alright, think instead about your relationship with money. Is the problem really quantity of money or quality of behavior?
Why do so many “rich” people have a problem with debt? Is lifestyle inflation inevitable?
Written By
I’m always telling loved ones that a little more won’t help their finances if they can’t properly manage a little.