Why High-Income Earners Are Living Paycheck to Paycheck

It's easy to associate those who make a modest salary or work in a low-paying job with a “paycheck to paycheck” lifestyle. But, a study from Nielsen Global ... Blog WhyHigh-IncomeEarnersAreLivingPaychecktoPaycheck Asix-figureincomecangoalongwayineasingfinancialstress.Butunfortunately,itdoesn’teliminatetheriskoflivingpaychecktopaycheck. It’seasytoassociatethosewhomakeamodestsalaryorworkinalow-payingjobwitha“paychecktopaycheck”lifestyle.But,astudyfromNielsenGlobalConsumerInsightsischangingthegame.Thestudyfoundthatoneinfourfamiliesmaking$150,000ormorearelivingasimilarlifestyle. LifestyleInflation:TheRichMan’sKryptonite There’saconceptthatevensomewealthypeoplehavetroubleunderstanding–it’snothowmuchyoumakethatmatters,buthowmuchyouspendthatmatters. Ifyoumake$500,000ayear,butyourannualexpensestotal$450,000,you’recompletelymaxingoutyourlifestyle.Doingthismeansthatyouwillneverreachyourfullfinancialpotential.That’sbecauseyou’reeroding90%ofyourmoneyjustasfastasyou’remakingit. High-incomeearnersroutinelysufferfromlifestyleinflation.I’veseenithappenmoretimesthanIcancount–peoplestartearningmoremoney,andinturn,slowlystartupgradingtheirlifestyle.Beforetheyknowit,lifestyle“creep”hassprintedoutofcontrolandhasthemcompletelyhandcuffed. Lifestyleinflationgenerallygoestowardthingsthatdon’tbringmuchvaluetoyourfamily’sfinanciallife,either.Thismeansthingslikeexpensivehomes,cars,traveling,andjustplainoldfoolishspending.It’sgreattohaveanddoallthesethings,butwhat’snotgreatiswindinguphousepoorandcarpoor. Abetteruseforthatexcessmoneywouldbetoinvestinyourself,orinyourmostimportantfinancialgoals. Related:The12BoringSecretstoGetting–andStaying–RichThatMillionairesWon’tTellYou WealthErosionOverload Buying“things”areonlythestartoflifestyleinflation.They’retherootsthatsproutalltheothererodingfactors. Forexample,sayyoubuyahomeworth$1.2million.Pileontopofjustthatthemortgage,propertytaxes,utilities,andgeneralupkeep,andyoucouldeasilyaddanother$50,000toyourannualexpenses.Expensiveitemsaren’tonlyexpensivetobuy,they’reexpensivetoown. Owningexpensivethingsisaneasywaytoerodeyourincome.Then,consideralltheothererodingfactorsontopofthisthatyou’llencounter–economicinflation,taxes,lostopportunitycost,plannedobsolescence,andmore. Related:3DangersofIgnoringYourTrueCostofLiving BeReasonable,NotLavish So,howcanyouavoidfindingyourselfinthisverysituation? Simple–livereasonably,notlavishly. ThisissomethingthatItrytoinstillinallmyclients,eventhewealthyentrepreneursthatIworkwith.Actually,thismantraisprobablymoreimportantforthemthananyone,becausetheyhavethemosttolose. Now,I’mnotsayingthatIexpectyoutoliveinatinyhome,driveanold,beat-upcar,nevertakeavacation,andneverpurchasesomethingthatyouwant.There’sabsolutelynoshameinindulging–I’mallaboutworkinghard,playinghard,andbeingabletoenjoythefinerthingsinlife. Afterall,thegoalistobeabletolivethelifeyouwant. Buttodothat,youhavetoabidebysomesimplerulestoensurethathappens.Theseincludespendinglessthanyoumake,payingforthingsincashratherthanfinancingeverythingyouowntomakeapurchase,notrackinguphigh-interestdebt,savingatleast15%ofyourincome,protectingyourselfandyourassets,andrememberingthatslowandsteadywinstherace. Related:15CommonSenseMoneyPrinciplesThatWillChangeYourLife There’ssomethingveryimportantthatI’velearnedfromcoachingclientsoverthelast14years–theoneswhounderstandthatit’sthesimple,boringdisciplinesthatholdthesecretsforgettingandstayingwealthy,aretheoneswhoreachtheirfullfinancialpotential. WhyDoesItMattertoYou? Livingpaychecktopaycheckisapossibilityforanyone–whetheryoumake$50,000or$5million.That’swhy,asyourincomegrows,youhavetocontrollifestyleinflationbeforeitcontrolsyou. Livingthelifeyouwantrequiresabalancingactbetweengrowingyourwealthandsmartwealthmanagement.Youshouldalwaysbethinkingwithanabundancemindset,butintherightway.It’snotabouthowyoucanuseyourmoneytobuylotsofthings.It’sabouthowyoucanuseyourmoneytocreateopportunitiesthatallowyoutogrow,tohelpyouliveintentionallywithyourmoney,andthatputyourresourcestoworkforyou.That’showyoureachyourfullfinancialpotential. ClientLogins