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[The following is a partial transcript of this episode of The Scott Alan Turner Show. Listen to the full episode to hear this story, listener questions, money hacks, and inspiring stories of people that are changing their financial lives. Subscribe to the free podcast on iTunes or Google Play]
Is it easier for high income earners to get richer because they make more money?
Most people at some point in their life believe that
- “If I can earn more, I’ll save more”.
- “If I just made another couple thousand more a year, I’d save that”.
- “When I get that big bonus, the tax refund, the raise, I’ll start investing”.
Think back, have you ever said something like that to yourself?
It’s going to be easier to become rich, with more money coming in. It sounds pretty simple, right?
- 25% of families making $150,000 a year or more are living paycheck-to-paycheck.
- One in three earning between $50,000 and $100,000 need their next paycheck to survive.
- For those earning less than $50,000, that percentage increases to half.
It doesn’t sound like it’s easier to become rich. There isn’t a big gap there between what people make and living paycheck to paycheck.
Sure, as people earn more, the potential to save more goes way up.
But potential doesn’t build wealth. Saving builds wealth.
It’s kinda like everyone has the potential to make a cake from scratch. But unless someone buys the ingredients, mixes them up, and puts it in the oven at 350 degrees for 25 minutes, nobody is getting dessert. Which is a shame.
If you’re already a saver or already part of the millionaire club, nice work! You’ve rocked your finances and overcome the struggle.
If you’re not there yet and working through the struggle, think about this:
Thomas Stanley in the best seller The Millionaire Next Door wrote:
If you live in a pricey home and neighborhood, you will act and buy like your neighbors … the more affluent the neighborhood, the more it’s residents spend on almost every conceivable product and service,“ he wrote. ”We take our consumption cues from our neighbors.
You can find that on every income level and every purchase.
Who you hang out with determines where you go out to eat, and then how much the food costs.
A family with kids that play sports, is going to want to buy the latest and greatest Air Jordan basketball shoes. Everybody knows you can’t dunk a basketball wearing $59.00 Converse All Stars, only the $259.00 sneakers make that happen. I think they have an anti-gravity feature at that price point.
Cars of course. A nice car shows everyone that someone has ‘arrived’ in life and their career. If only everyone would realize the bank owns the car, the driver is just borrowing it, it would be much less impressive.
You’re $800 a month car payment Turner, it was so impressive.
Everyone experiences lifestyle creep. I was having a conversation this morning about today’s show topic. One person made the comment nobody is living like they did when they went to college.
What’s also true, is it’s ok to not go back quite that far and living off ramen noodles to build wealth.
Less stuff, more joy. Just ask Marie Kondo. I don’t know why, I keep wanting to call her Kobiashi Maru, which isn’t even a person. It’s the name of an exam.
The Magic Art of Throwing Out Crapola, it will bring you great joy. It’s the new way to clean up where you live! Do you know Katie, she charges thousands of dollars to come to your house and boss you around. I’d do that job for half the price. I love to clean.
Less stuff, less problems which results in less stress.
Less stuff, more money for things you probably place more importance on – retirement, college savings, vacations, the next car or house.
Try this – just go clean out the junk drawer and see how that feels. Or clean out the fridge. Ahhh. So much happier, right?
Realize most people who have nothing and no money, have more than a doctor or lawyer with $200,000 in student loans. My 5-year-old daughter, who has $14 now – $10 from selling honey, and $4 from the tooth fairy, has more money than a Doctor earning $250,000 a year, who probably spends $250,000 to look good.
There is a trickle down effect from having your income support your future rather than using your income to support your spending.
- More money for the kids college.
- Moms or dads that want to stay home when the baby shows up, you don’t have to figure out how to make it work going from two incomes to one income.
- leaving that bad job behind
It’s a trap and a vicious cycle. As income goes up, lifestyle goes up, and it’s very hard to go back down. People feel like they have to maintain their lifestyle or else something must be wrong. It’s never downsizing my friend, it’s rightsizing. It’s what’s right for you.
Know we all have lifestyle creep. Sometimes it’s a good thing to get some more joy out of life. I believe everyone deserves to eat at a nice Italian restaurant. I’ve come a long way since growing up on Chef Boyardee and Spaghetti O’s. Olive Garden, is not your final destination. If it is, go see a doctor my friend and get your taste buds checked out.
But that’s lifestyle creep, right? Keep your focus on what’s important, and understand you have this spending plan that allows for certain things. But people who constantly max out their life to match their income are minimizing their free time because they need to keep working and working and working to pay all the bills.
People will never be able to stop working until they stop spending everything.
You can break the cycle, by breaking the cycle.
It’s no necessary for you to win all the battles, but you will need to win the war.
How To Get Started Investing
The international bestseller by CERTIFIED FINANCIAL PLANNER™ Scott Alan Turner. Choose the right accounts & investments so your money grows for you – automatically. No jargon, confusion, or pie in the sky promises. Just a proven plan that works.