Confession – I’m not saving as much money as I could.
It doesn’t help that my boyfriend keeps sending me links to luxury apartment rentals – you know, the ones in elevator buildings that come with dishwashers and gasp, IN UNIT laundry (we live in Manhattan where these things are a BIG deal).
It’s the ultimate first world problem – earning more than enough money to meet my essential needs. In fact, it’s beyond first world – I feel like royalty. No mortgage, no children, not even pets, it’s dangerously easy to get carried away when you experience budget breathing room for the very first time.
For my part, the majority of my discretionary allowance has been sucked into my biz, but I won’t deny some lifestyle inflation – that is, increased spending in tandem with my increased earnings.
I can hardly remember the last time I took the bus to the airport. And in the past month, I’ve become a weekly meal delivery service convert (ps. try a discounted box with my referral link).
In short, I’m spending more than ever – and I’m surprisingly okay with it. Maybe too okay?
Even regular visits to Starbucks for the last two weeks of frappuccino happy hour haven’t sounded off my frugality alarm bells.
While the prices of these splurges have remained the same (or similar), the cost to me is less thanks to recent income gains. When I was working my old babysitting job for example, a $5 happy hour margarita was the equivalent of 20 minutes of work BEFORE taxes. Now, that same $5 price tag is just a fraction of the time cost. So no worries, right?
But I know too well how a series of $5-50 lifestyle upgrades has the potential snowball into financial disaster – even with substantial income gains.
According to a 2015 survey, roughly 25% of $100,000 plus income households were living paycheck to paycheck
And among millennials, it’s worse…
44% of millennials earning between $100,000 and $149,000 live paycheck to paycheck.
[tweetthis]44% of #millennials earning between $100,000 and $149,000 live paycheck to paycheck. #personalfinance [/tweetthis]
Interestingly though, the percentage drops to 33.5% among those earning $50,000 to $75,000.
In other words, those who make less are also less likely to live paycheck to paycheck.
I’m sure that percentage goes back up when you dip below a certain income level, but it’s certainly worth noting that those with substantial amounts of discretionary income seem to have more trouble managing their finances than those with less.
As I face the admittedly exciting prospect of increased discretionary income myself, I worry I too might succumb to the allure of luxe living at the expense of my long-term financial health.
Perhaps now more than ever, it’s become critical to build a new budget. One that extends beyond the basics of housing, insurance and food, and keeps my spending grounded in my values, even when that spending is discretionary.
In fact, anyone experiencing their first taste of disposable income should implement this practice to make sure their newfound financial flexibility is used in service of the things they truly value, such that they’re not thrown off course by fleeting temptations that jeopardize their financial well-being in the long-term.
I break down my three steps for aligning your spending with your values in this most recent column for SUCCESS magazine – check it out.
Ultimately yes, you can indulge in that cookie or cocktail or massage – even the luxury apartment complete with washer/ dryer, as long as you make those choices with full consideration for your present and future financial realities – and priorities.
As I write in my latest SUCCESS column….
I reached out to my fellow finance writers to see how they splurge in service of their own big picture priorities….
“Ultimately, the scarce resource is time. I’m willing to pay for things that don’t absolutely require me to do them so I can free up time for what I do care about. Examples are gardener, housecleaner, VA, auto repair. These are all things I’m perfectly capable of doing, but I splurge and buy back that time.” Todd Tresidder @ Financial Mentor
“I think that’s the beauty of value-based budget because everyone has different definition of necessity and splurge. I love good food and cooking, so I can’t budget myself to eat only beans and rice; but I can budget very little on clothes. It’s really up to each person to decide what is must-have vs good-to-have.” Hui-chin Chen @ Money Matters for Globetrotters
“Our dividing line between “necessary” and “splurge” is apathy. We care about buying quality groceries, and on travel, we enjoy staying in nicer hotel rooms or AirBnB apartments. It’s a quality of life. But we shop at Goodwill because we really don’t care.” Doug Nordman @ The Military Guide
“We have an RV and that is definitely a splurge. We spend over $1,000 a month on travel and I don’t expect that to go down anytime soon. Traveling full-time is a blast!
A person needs to be careful when splurging. You should always make sure that your other financial needs are being met first, such as paying down debt, building an emergency fund, saving for retirement, and more. The splurge won’t be worth it if you are stressed out about everything else in your life.” Michelle Schroeder @ Making Sense of Cents
“One “splurge” I’m happy to pay for is a bi-weekly housekeeper. While I can clean my house myself, I find that hiring someone increases my productivity while eliminating one of the biggest stressors in my life.
Since I earn considerably more per hour than I pay someone to clean, hiring someone also makes a lot of financial sense. And on Saturdays, when I have the most free time to burn, I would much rather spend time with my children than mop floors. Month after month, the cash we spend on a housekeeper is some of the best money we spend.” Holly @ Club Thrifty
“I spend thousands on travel per year. It is in line with my values, and fits within my budget as I live in a cheap country anyway, so what I spend on travel, my friends spend on rent in more expensive places.
Since I barely spend money on other things, almost never buy clothes, go out when not traveling, etc. it balances the budget out. And I make specific goals. For example, if I earn a certain amount from my blogs I can splurge on more travel, otherwise I stick to a lower budget.” Pauline @ Reach Financial Independence
“We have daycare for our two kids, it costs us about $3,000 a month, and we do it primarily because we feel it’s good for our children to be socialized in group environments, learn a bit of structure, and get challenged in ways that they wouldn’t be if they stayed at home with us.
Daycare seems to be a hot button subject because 1) it’s expensive and 2) there are some folks who feel like you are doing your children a disservice if you don’t personally care for them all the time. This is felt far more acutely by women, which is unfair.
Another reason is because my wife wants to have a professional career and have a greater impact on the world. She’s a PHD in biomedical engineering and while she is a fantastic mother to our kids, she’s can impact more than two people (our kids) by helping startups get their product to market.” Jim Wang @ Wallet Hacks
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