Do you often feel like you don’t have enough money? I’ve been there more times than I’d like to admit. You’re making a living but for some reason you’re always short. It feels like there’s an invisible leak somewhere in your bank account. You probably increased your income through the years but it seems like it really hasn’t changed anything. If you’re flustered by your light wallet, I just might have the answer. But, before we move forward, I’m going to ask you, will you take the red pill or the blue pill.
1. You’ve been living in an illusion
Ok, so the truth it is—you’ve been brainwashed. That’s right. Our society has convinced you that you are not enough and that you must acquire material things to be happy and fulfilled. From the pixel-perfect photos of hot influencers on Instagram to the expertly crafted product review videos on YouTube, everyone is selling you an illusion. Businesses hire marketing departments to convince you that you are always lacking something. If you only had this, then you’d be happy. If you only had that, you’d be fulfilled.
Do these messages sound familiar?
“Open happiness” – Coca Cola
“The best or nothing” – Mercedes Benz
“Beautiful design makes a beautiful life” – Tiffany & Co
Many of us inherit our beliefs from our family and our culture. Either explicitly or implicitly this message has been ingrained in our psyches since we were children. When I was in high school I moved from a middle-class neighborhood in New Jersey to another one in Orange County, California. One of the things I noticed was that there were so many more premium cars on the road. We didn’t move to a wealthier neighborhood. It was the local car culture. The common belief was “you are what you drive.” It was strange to see so many people driving around brand new BMWs and Benzes.
As unusual as that was to me at the time, I eventually adopted those beliefs. I soon found myself deep in car magazines and conversations about the most desirable cars. My friends and I would identify acquaintances by what they drove. There was “Acura Mike” and “Camaro John.” Like my peers, I identified myself with what I drove. Even worse, once I got the car I wanted, I obsessed over my next car. Crazy, isn’t it?
When everyone around you believes in a “truth” it’s very likely you start believing it, too. Did your family paint you a picture of a successful life? How about your friends or colleagues? Did it involve a large house, nice cars, and nice things? Do these things represent you? Do you identify with these things and the image that they represent? Are they true?
2. Lifestyle Creep
So you’re getting by on your salary. You may not have millions in the bank but you’re living a comfortable life with only first-world problems. Recently your boss noticed your contributions to the company and rewarded you with a 20% raise. Instead of saving or investing the extra income, you decide to upgrade your tv, get a new wardrobe and match your lifestyle to your higher income.
There’s a new rush of excitement and joy but after a couple of weeks you feel the same way you did before the new shiny toys. WTF! If I got a 20% raise, I should be 20% happier every day, right? Welcome to the club! Known as the Hedonic Treadmill, this insidious first-world problem affects many of us in today’s consumerist society.
Coined by Brickman and Campbell in their article “Hedonic Relativism and Planning the Good Society,” the “Hedonic Treadmill” describes the elasticity of our levels of happiness. We all have a baseline level of happiness. When something positive happens in our lives our level of happiness spikes up but then eventually comes back down to where we were before.
So are we forever chasing rainbows? Yes, if left unchecked, you can earn exorbitant amounts of money and find yourself broke and no happier than you were before.
What if I told you, there are people financially drowning on $300,000 a year? Before you write me off as some idiot on the internet, you’ll want to hear this.
Known as TEWNS (The Elite With No Savings), these top 2% earners suffer from the same problem as those earning much less. They tend to live in ultra-expensive places like DC Suburbs, New York City, and San Francisco where the Department of Housing classified an annual salary of $117,000 as low income. Even with their high salaries, they end up borrowing money from their parents to pay for a medical emergency or other unexpected expense. So how does this happen? This table will give you a good idea.
Furthermore, when you’re living amongst the 1% and people who earn more than you, you can feel relatively poor.
3. You don’t pay yourself first
Netflix, Starbucks, and Visa are getting more love than you. By paying your bills first, your priorities get pushed back and compromised. Let’s say you want to save $500 every month.
But, life happens and you end up spending more than you expected. Maybe, you get a few more meals at the restaurant here, a new outfit there and a few more trips to the barista than normal.
When the credit card bill comes along with your rent, you end up paying your expenses and saving whatever, if anything, you have left. Instead of paying yourself the $500, you just paid everybody else. Wouldn’t make more sense to save the $500 first and spend what you have left?
The Solution – the truth will set you free.
When you think about it, it seems like you were born into a world that’s set up to make you fail. It’s not your fault, but your financial success is your responsibility. I don’t believe in being a victim and neither should you.
Wake up! Take an audit of yourself. Now that you’re more aware of what’s going around you, your next step is to become more self-aware.
Keep track of what you buy and why you buy it. Are you being manipulated into spending money? Ask yourself, “Is this really important to me or my ego?“ Remember, Net Worth ≠ Self Worth.
Once you have a better idea of your spending patterns, you can take a proactive approach to manage your money—also known as budgeting. By assigning a job to every dollar, you are taking control of your money. And, that’s how you go from broke to financially fit.