More Money May Not Be the Answer

Affluence is not measured by your annual income. Affluence is determined by how many of your resources you manage not to spend — the amount of income you keep.

The idea that you should live below your means is obvious, isn’t it? It’s not like this is the first time you’ve ever heard of the concept. You know that cutting spending is hard work. But living paycheck to paycheck is much harder work. So if you knew how to stop spending so much, it’s safe to say you’d be doing that by now.

Living on less than you earn takes effort. Like swimming upstream or walking up the down escalator, you have to work at going against the flow. It takes a conscious effort to spend less on everything from food to ATM fees, insurance to clothes, and the fun things in life, too.

Sadly, by the looks of climbing credit card debt in the U.S., too few people are willing to put forth the effort. It seems easier to just spend all you have and then depend on credit to cover the gap between what you need and how much you make.

At the time, it seems fine to have it all now and pay later. Yet we eventually learn the long-term effects of that spending error. If you don’t have the money to pay in full today, what makes you think you’ll have it next month? Or every month thereafter as you continue to make only the minimum payment?

If you are not where you’d like to be with your money, don’t assume that’s because you make less money than you desire. Is there any cap on how much money you wish you made? It’s time to face facts: Increased income does not guarantee a better life.

Think about it: Ten years ago, your annual income was less than it is now. Perhaps it was a lot less. You believed then if you only made more money, you’d be out of debt and on your way to building wealth and securing your future.

Then you got a raise or changed careers. Your annual income improved. You breathed a momentary sigh of relief and treated yourself to a better car or a new device. You added new expenses and accepted new debt. And why not? You felt entitled to improve your standard of living. Before long you got to thinking that if you only made more money, you’d be out of debt, and on your way to building wealth and securing your future.

Then you got a raise or changed careers. You made more money. You took on more expenses, added more debt. I know I am repeating myself, and that is my point. You’re caught in a vicious cycle that insists more money is the only way to improve one’s financial situation.

More money alone is not likely to change your life. You’ve proven that. But making the decision to stop spending all of it so you can keep more of it — by making sacrifices, cutting out all nonessentials, dropping your attitudes of entitlement and living as frugally as it takes to keep your outgo less than your income — that’s the solution.