Why you Feel Poorer Even Though you Make More Money… and what you can do about it

Published on January 19, 2016 By Lauren
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    Why you feel poorer even though you make more money, and what you can do about it.

    When I was preparing our line-by-line budget last week, I got to thinking… why does it seem so hard to save money? Why is it such a sacrifice to give? And I don't know if it's just me, but it seems way harder now than it was 15 years ago. Is it? And if so, why?

    I put my nerd hat on to try and figure out why.

    The basics of every budget has income and expenses. And over time, both income and expenses change.

    When income rises faster than expenses, the result is awesomeness.

    When expenses rise faster than income, the result is… well… whatever the opposite of awesomeness is. And it's not fun.

    Unfortunately, it seems that we haven't had too much awesomeness over the past decade and a half. Have you ever been excited to get your end of year raise only to have it completely offset by an increase in healthcare premiums?

    Many of us “feel” it… but I wanted to provide some numbers to this feeling. Just for giggles, I decided to see what my own budget for January would look like if wages and expenses moved at the same rate since the year 2000.

    up and down

    Here's what I found… if expenses had risen at the same rate as wages over the past 15 years, I'd have an extra $450 in my monthly budget!

    Put another way, inflation has taken away 9% of my income!

    My budget

     

    (For nerds like myself interested in the numbers, I used industry specific CPI here, here and here)

    Even if you've been kicking butt in your career flying up the income ladder, this still affects you.

    Luckily, we've actually had some relief with natural gas and oil prices over the past several years. So that helps… but not enough to offset the trend of wage increases lagging expense increases.

    Another way to look at it

    But what if we decided to use this to our advantage? What if we could use a difficult economic reality to propel us into super-intentional living?

    The best way to do this is to learn how to budget – and here's an easy way to do just that:

    I think about it like this – whenever I make a choice to be more frugal, by NOT spending money or making a sacrifice (whether by choice or circumstance) it's almost always a good thing with benefits WAY beyond financial.

    Here's an example. Back when we needed an emergency fund (and had $0 in savings), we had no way to get that money. So we were forced to get creative. And sacrificial.

    I sold my beloved drum set. I sacrificed something that brought me a lot of joy so that our family might have a better future. And then we got crazy and sold about half of the stuff we owned (I'm not joking) and got down to the bare essentials.

    The benefits were huge. We had an emergency fund, paid off a few thousand in debt, but there was this other intangible benefit. Finances were still tight, but something magical happened… I couldn't quite put my finger on it until much later.

    That magical feeling was that we finally found purpose and intent in our lives. We were happier. We had a new appreciation for life despite our circumstances. Even though we might stay in our starter home forever, we knew what we wanted out of life and nothing was going to stop us.

    So maybe the economy sucks.

    It's ok.

    Take action NOW. Live on less than we need to, save for the future, and find fulfillment through purposeful living – not just stuff.

    Have you experienced this first hand? What are your thoughts?

    COMMENTS

  • As of today, we said goodbye to homeschooling which should free up about 900 a month for us (co op fees, tutors, supplies, decreased transportation ect). Our oldest is no longer doing year around swim which would free up another 500. We should be rolling in savings now. Unfortunately, this ended up being the summer of ER visits and tons of medical specialists costs. Then our trusty van clunker died. We had to get a used new to us vehicle with monthly payments and an increase in insurance (by the way having male teen drivers increases rates substantially). Instead of living pay check to paycheck or being able to save 1400 monthly as originally planned, we are drowning in new debt and I will be looking for a new job to help compensate for the costs of the medical bills! Sigh

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