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Why Higher Income Doesn’t Guarantee Financial Success

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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?

About Kim Parr

Kim Parr is a private practice optometrist, freelance writer, and personal financial blogger. You can follow her journey to 20/20 financial vision at Eyes on the Dollar.

11 comments

  1. I think lifestyle inflation is a slow “creep”. Many people scoff at those who shop at high end grocery stores for example. But if you examine what you eat now to, let’s say, 10 years ago, there is most likely a marked difference.

    Cars are another good example. Having a 10 year old hand me down used to be fine. Then most people go to used cars. Then new cars. Then luxury cars. It’s hard to go back after that.

    A good practice would be to evaluate your expenses once a year or so and see where things are starting to creep up…and nip them in the bud!

  2. Brian at Debt Discipline said one time “I learned that I can’t out-earn my stupidity with money.” IMHO, that sums it up perfectly. ๐Ÿ™‚

  3. Always pasta with sauce isn’t healthy. Healthy food is expensive.
    The older you become the more you know how bad food, bad bedding bad shoes are fatal to your health.
    The older I am, the worse is my skin. I have psoriasis, it becomes worse over the years and only the expensive shampoo helps me.
    When I was young I slept on the cheapest mattresses and I didn’t mind.
    Nowadays my back hurts and I barely can sleep in bad hotels.
    For longer distances I rent a big car with crumple zone, to increase my chance to survive a car crash. I didn’t think about such things when I was younger.
    The older you are the more you have to take care of your health and this is expensive.

  4. My mom always told me about this! “It doesn’t matter how much money you spend if you make it all,” she would say. That is so true.

  5. This is some good writing and I recently wrote about a similar topic. If you control spending behaviors you will have the opportunity to fund financial goals, if you don’t you will end up like Kanye. Some people say its a publicity stunt to sell more albums, but I wouldn’t doubt that its true. 53 Million is nothing if he could just stop spending and apply 3 years of his income to pay it off, now will that happen, probably no. Bankruptcy is the next step.

  6. Our income has about tripled since the worst days we experienced. Life is definitely easier, but we still struggle.

    A lot of that is out of our control. Health is a huge drain. Some of Tim’s medication isn’t covered by insurance, and we spend $600-700 a month on that alone. Some of it is the cost of owning a home. Our mortgage is ridiculously low, and our utilities are finally under control, but repairs still come up. Plus things like the business Internet I have to pay for to get the static IP I need for my job.

    But some of it is definitely a bit of lifestyle inflation. We’re still not saving as much as I want, but it’s a work in progress to trim expenses without overly affecting quality of life.

  7. Yes lifestyle inflation is inevitable – you can’t live in the dorm for your whole life when you have a family, you will want to take your family out for a nice vacaiton once in a while which you don’t need to do when you are younger. But the key is to not over-inflate. As long as income keeps up with (hopefully grows faster than) the lifestlyel change, I don’t think it’s a problem.
    I agree, financial success has more to do with budgeting and consistent saving/investing than just income. Of course higher income will make savings easier but it’s hardly a gurantee, or even a major indicator.

  8. Lifestyle inflation is the cause why rich people still have debts. They have to control and control their expenses. These people with debts might need to do budgeting and apply some financial strategy like snowballing or envelope system. They gotta learn to be financially responsible.

  9. I’m always telling loved ones that a little more won’t help their finances if they can’t properly manage a little.

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