Monthly Archives: November 2018
By: Tom Chatham
The consumer culture most Americans have grown up in has left them with a distorted sense of what being rich is. To someone making $20K a year someone making $50K is rich. To someone making $50K a year a person making $150K a year is rich. The problem is that most people, even many of those making over $100K a year, are living paycheck to paycheck. This is due to the conditioning people have had over the decades. No matter how much they make they are conditioned to spend all of it.
If they have a nice place and suddenly start making a lot more money, they instinctively look for a bigger, more expensive place to live. People adjust their spending to how much money they have, not necessarily how much they need. This ultimately leaves them perpetually broke or near it.
There are people living on less than $20K a year with a good quality of life even though they are considered poor. It’s all a matter of priorities. You need to decide what is important to you and make that your life’s goal, not necessarily making a larger paycheck. More money provides you with more opportunities in life but do not confuse that with a better or happier life simply because of the money.
Wealth is what you are able to keep, not what you are able to make. When you start looking at money in this way you will be able to reduce your spending to needs and have more savings to use later. I personally know someone who inherited 50 million dollars and all of it was gone in a few years with nothing to show for it. Would you consider this person rich or poor? He had more cash at one time than most people make in a lifetime but what does that matter now? Once it leaves your hands it is no longer your wealth but someone else’s.
You may buy something like a new pair of shoes that cost a lot and they may make you feel good for a while but if you only wear them a few times then throw them in the closet never to be worn again, how much were those shoes worth to you in the long term? When you are thinking about buying a new piece of equipment to make your work faster and easier, if you are not going to do something useful with the extra time you will have you need to ask if the new equipment is actually worth it.
When you start asking these kinds of questions before every purchase you may find you can not justify making the purchase and skip it. You do not need to eliminate every want you may have you just need to curb them to keep your spending manageable.
Retirement is a relatively new concept. People take it for granted today that at some point they can stop working and they will still have the money they need to pay for things. That is only possible for many because of government programs that provide for them. If those programs ever stop, those depending on them will have nothing to fall back on. Even if you are supposed to get money from a retirement account or pension plan, if those funds are lost for any reason you will never see them. Those funds are worth nothing to you until they are actually in your hand. Having money saved that is actually in your hands will guarantee you have something to pay for your needs and can help you sleep at night.
When you reduce your spending to needs you have more money to save for some future time when you may be desperate and need it. The end of the world does not have to be a full blown economic collapse or WWIII. If you lose your job and cannot find another one it may very well feel like the end of the world if you can no longer pay your bills or buy food.
When you save you are essentially providing the means to pay for future needs out of present earnings. If you find yourself unable to work at some point in the future it will be essential that you have the means to provide for your needs. This can only be guaranteed through savings. Future promises of payments cannot be guaranteed by any means. A regular program of savings can accumulate over time to provide the safety net you will eventually need. Keeping that money safe and preventing the loss of purchasing power over time is also essential but that is a topic for another time.