Make More Money, Spend More MoneyOctober 5th, 2010 by Michael Kwan
Not Exactly Starving
I won’t name names, but she has been able to sustain a reasonably well-paying full-time job and she currently owns a relatively modest apartment in a good part of town. With tongue in cheek, she pondered whether the reason why she was “so poor” was because she enjoys eating out and shopping. Certainly, those can bite into one’s budget quite quickly, but it’s more likely that mortgage and strata payments are taking a bigger chunk out of her paycheque.
As I said, realistically, she knew that she wasn’t all that poor, but it took a bit of a reality check to realize it. What we quickly concluded was that she was falling into the pitfall that many of us do: make more money, spend more money. As soon as you get a new job that pays better than your old one, you may feel more inclined to buy fancier clothes or go out for fancier dinners. That’s understandable and its human nature. However, from a financial standpoint, it may not make the most sense.
A Matter of Perspective
Speaking from my own personal experience, I can say that I also fell into the same pitfall during my university days. Prior to starting the co-operative education program, I had not held a full-time job. I was “just” a student, after all, so I held part-time jobs here and there. After landing two full-time positions, however, I found that I was starting to accumulate a little bit of wealth… relatively speaking. I saw my bank account “swell” to a few thousand dollars.
I saved some, to be sure, but I also spent a fair bit on eating out and on modifications for my car. It’s debatable whether this was money well spent, but it did bring me some happiness. The same thing can be said when I embarked on this freelance writing journey for the first time and saw a consistent income coming through the door. Expenses increased again and, as mentioned above, this isn’t necessarily a good thing, especially if said expenses are largely unnecessary.
Live Below Your Means
If you manage to make $100,000 a year, but you spend $120,000 a year, you’re going to feel poor. If you make $1 million a year and you spend $2 million, you’re probably still going to feel poor. Yes, making more money can help with a lot of situations, but it won’t — in and of itself — solve all of your financial issues.
Instead, the key is learning how to live below your means. Taking the same example of the $100,000 job, try to spend much less than that and still sustain a relatively reasonable standard of living. You’ll find that you can actually save money, be it for your children’s educational fund, your retirement fund, or what-have-you.
By doing so, I feel you’re less likely to feel poor, comparatively speaking, because you can see that your savings are actually increasing and that you’re not living paycheque to paycheque… regardless of the size of said paycheque.
Filed under Money.