It’s a curious fact of life that as your income grows, so, too, can your expenses. More money earned may turn into more money spent. But is all the spending really necessary?
One study found that money makes us happy when it serves to improve our social standing with our peers. So, when your neighbors, the Joneses, buy that new car, it’s easy to think it may be time to get one that is just a little bit nicer. But this desire to keep up with the Joneses can quickly snowball out of control. Let’s take a look at what you might do with that extra money the next time your income goes up.
Let’s say the Jones family just remodeled their living room and kitchen, and you’d like to do the same. That’s $50,000 you were going to spend. Earning a hypothetical 6.5% rate of return, would more than triple in 20 years. So, you could redecorate now or invest the money and have $160,000 down the road.
It’s a simple fact of life that lifestyle inflation can be the enemy of wealth building. Call us today and let’s talk about how to manage your wealth.
This is meant for educational purposes only. It should not be considered investment advice, nor does it constitute a recommendation to take a particular course of action. Please consult with a financial professional regarding your personal situation prior to making any financial related decisions.
The hypothetical example is for illustration purposes only and is not intended to be representative of actual results or any specific investment, which will fluctuate in value. The determinations made by this example are not guarantees or projections, and no taxes or fees/expenses are included in the calculations which would reduce the figures shown. Please keep in mind that it is possible to lose money by investing and actual results will vary.