💰 The Myth of High Income Equals High Savings

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Hey there.

Let me tell you about Denis Diderot, a renowned French thinker who struggled with financial hardship for most of his life until a pivotal moment in 1765.

At 52, facing his daughter's upcoming wedding and lacking the funds for her dowry, his life took an unexpected turn.

Known for co-creating and contributing to the Encyclopédie, a major encyclopedia of that era, Diderot caught the attention of Russian Empress Catherine the Great.

She offered to purchase his library for what would be roughly $50,000 USD in today's terms, suddenly giving Diderot some financial breathing room.

But things took a turn for the worse after he bought himself a new, flashy scarlet robe.

Before he knew it, he was broke.

This is called Lifestyle Inflation or Lifestyle Creep.

Sound familiar?

If your salary's grown but your savings haven't, you need to keep reading.

What You'll Gain

• Understand the spending traps that can empty your savings account and how to sidestep them.

• Learn the effortless way to save through automation.

• Realize the influence of your social circle on your spending habits

• Identify when it's smart to increase your spending.

The Salary Illusion: More Doesn’t Mean More

Remember those days when a smaller paycheck still left room for savings?

Now, even with a higher salary, your savings account looks like it's on a hunger strike.

Why is that?

• Action Step: Take a minute to compare your current savings rate with the time when you earned less.

The Spending Traps

The Diderot Effect: It Starts With One Purchase

Just like Diderot, you get a salary bump and decide to treat yourself to something nice—a new car, perhaps.

Then you think, "My old apartment doesn't match my new lifestyle."

Before you know it, you're surrounded by new things but burdened with old problems: debt and zero savings.

Mine began when I bought my first pair of Jordans.

Then followed the G-Schocks, sneakerhead shirts, and caps to match my gorgeous pair.

• Question to Ponder: What was your 'new robe' that set off a spending domino effect?

Parkinson's Law: The Hidden Culprit

Ever hear the saying, "The more you have, the more you spend"?

That's Parkinson's Law in a nutshell.

Like cookies in a jar, the more space you have, the more you'll want to fill it.

A salary bump should mean a savings boost, not an invitation for more spending

• Question to Ponder: Have you noticed how your spending always seems to match your income?

The Power Strategies

Pay Yourself First

Salary minus savings equals expenses.

When that paycheck comes in, don't even think about spending before you've set aside a good chunk for savings.

• Action Step: Setup automatic transfers from your salary account to your savings account.

Choose Your Crew Wisely

You are the average of the five people you spend the most time with.

If your circle is all about the latest gadgets, posh dinners, and luxury vacations, guess what?

You'll likely fall into the same spending patterns.

• Action Step: Surround yourself with people who prioritize saving and investing, and you'll find it easier to do the same.

Your Secret Weapon: The Power of Frugality

Frugality isn't about cutting corners; it's about building a future.

It's the art of knowing that less can actually be more if it leads to consistent saving and investing.

I previously wrote about how you can indulge without breaking the bank.

• Action Step: List three lifestyle tweaks you can commit to this month to embrace frugality.

When is Lifestyle Inflation OK?

Not all spending is bad.

Sometimes, you've got to spend money to make room for what matters.

Upgrading your laptop for better work performance?

That's an investment.

Spending quality time with family?

Priceless.

• Take Action: Make a list of essential lifestyle upgrades. Budget for them, so they don't break your bank.

Know that your income is the most important or powerful tool for building wealth.

Don’t waste it on unconscious lifestyle upgrades.

Life's not about how much you make; it's about how much you keep and grow.

Grow wealthy and wise.

Kuya Jay💰

Whenever you’re ready, here are two ways I can help you:

• Financial Coaching: An in-depth, three-part financial coaching program for singles, couples or a group of five people.

• Financial Wellness Program: A bespoke Financial Education program made for your employees’ preferred topics about money.

• Speaking: Invite Kuya Jay for a Financial Literacy talk or workshop for your organization or community.

Learn more by scheduling a 30-minute discovery call here.