It is an interesting fact that as your income grows, spending typically increases as well. Often, as your income increases, you spend more money without even noticing it—it’s another kind of inflation that adds up to lost saving opportunities.
When the Joneses come home with that brand new car, it’s easy to get the urge to go out and buy a newer, nicer car yourself.
That urge to keep up with the Joneses can easily snowball out of control; buying more, bigger, and “better stuff.” A study published in Science Daily found that money makes us happy when it improves our social standing with our peers.
Maybe the Smiths next door just remodeled their kitchen, and you decide it’s time to update your home too. Is this something that makes financial sense?
If you consider spending $50,000 for “better stuff”, instead, take a look at how saving, rather than spending, that money could affect your long-term savings picture.
In 20 years, that $50,000 could more than triple to over $160,000, if invested at a hypothetical 6%.
Ask Yourself, Is All That Spending Necessary?
It’s not easy to forgo items that provide immediate gratification and provide you a more comfortable lifestyle tomorrow. When getting a raise, it’s very easy to imagine what you could do with the extra money. Your options may include: invest it, save it, and avoid spending unless it is necessary.
To help you live comfortably when it comes time for retirement, consider an increase to your before or after-tax retirement accounts when you receive a raise to grow your wealth. This decision will help you ultimately gain additional financial security for your future.
Lifestyle inflation can be the enemy of wealth accumulation.
How Can We Help?
Aldrich Wealth LP helps our clients protect and grow their financial assets for the future by helping them make smart financial decisions today. If you would like assistance in determining your retirement needs, please call Aldrich Wealth at 888-299-3102 to speak with a financial advisor.
Meet the Author
Partner, Director of Corporate Retirement Plans
Heather Wonderly, AIF®, CPFA
Heather has been working in the investment field since 2000. She provides guidance to 401(k) pension committees, helping them understand investments, compliance, fiduciary responsibility, and administration for corporate retirement plans. She also provides ongoing employee education to plan participants. She holds an Accredited Investment Fiduciary® and Certified Plan Fiduciary Advisor credentials and has also completed the…
- Certified Plan Fiduciary Advisor
- Series 7 and Series 66 security exams
- Accredited Investment Fiduciary®
- Corporate retirement plans