This bothered me. Not because I was jealous of our acquaintance’s healthy household income, but because my friend automatically assumed that because of the salary they were making, they were automatically rich. If there’s one thing I’ve learned since I started this personal finance journey, is that when it comes to money, you can’t judge how financially savvy someone is by their salary or their appearance.
The definition of the word “rich” means to have a great deal of money or assets. Well, if our acquaintance is making $240,000, but also spending $240,000, then she isn’t rich – she’s just living a $240,000 lifestyle. A big pay cheque doesn’t mean a thing if you have nothing to show for it, and we just didn’t know what their financial situation is to know if they are actually “rich.”
From 2006 to 2011 (5 years) I grew my net worth from -$20,000 to +$63,000. That’s a difference of $83,000 (or an average of $16,600 per year)! And I did that all on an average annual salary of $44,000. My salary was quite low, but my savings rate made me feel rich.
Now that my income is higher (I’ll earn around $85,000 to 90,000 this year), I’m trying really hard to curb lifestyle inflation. Because let’s be real, the more money you make, the more you have to spend (and the more you likely will spend). More money equals upgrading your housing, buying nicer clothing, more frequent Starbucks trips, and more vacations. I’m guilty of some of those things, but I’m trying the best I can. :)
Below is a chart based on an average month of spending for me in 2007, 2013, and 2016:
Related: Can lifestyle inflation be avoided?
Let me be the first to tell you that I’m not rich. I do not earn large pay cheques, and my net worth is only about $120,000. But my monthly expenses (as shown above) aren’t that much different than they were 9 or 10 years ago. My rent has only gone up by $100, and I feel like my groceries and entertainment budget have increased by a normal amount.
So while my $120,000 net worth isn’t much to celebrate now, that number will continue to increase every month. And 2016 could turn out to be a great year for me, as I have the ability to save nearly $40,000 if I stick to my budget.
I’ve blogged about it before, but I no longer aspire to earn more money. If it happens, it’ll be due to working hard at my full-time job or becoming more strategic with my freelancing. But I’m not going to sacrifice my lifestyle in pursuit of more dollars. :) So that means I’m never going to have a enviable salary that my friends can talk about behind my back. I’ll never wear high fashion brand name clothes, or fly first class, or hire house cleaners (but actually that’s mostly because RD refuses to let me). I just want to be comfortable.
My method of getting rich is by being smart with the money that I already earn. I want to save at least 50% of my net income this year, curb lifestyle inflation as best I can, and grow my wealth in a healthy and sustainable way. To me, this seems like a way better plan than trying to figure out a way to earn millions of dollars, or buying Lotto Max tickets in the hope of striking rich. :)
So whenever you hear of someone who earns the kind of salary you could only dream of, just remember that comparing yourself to others (while tempting to do) is never a good idea. There are always going to be people who make more money than you, but you can live a fulfilling life on your own terms by keeping lifestyle inflation in check and saving your money.
What are your savings goals for 2016?
Recently I read a blog post by a woman who refuses to date men who make less than six figures. “I am all about living life, and not about working to pay for it,” she wrote. At first, I was outraged because shouldn’t we all be striving for our own personal financial independence? It’s the main goal of this blog! But now that it’s been a couple of weeks since I first read that post, I have to admit that I kind of get where she’s coming from.
I’ve never specifically laid out financial requirements for a potential partner, but I’ve always gravitated towards men who were ambitious and financially capable of supporting a certain lifestyle. I’m not talking about flying first class or living in penthouse apartments – I just mean being able to enjoy similar interests, vacation styles, comfortable apartments, and early retirement goals.
And in my previous relationships where there was a financial disparity? It sometimes caused friction. So seeking a partner who made a good income just seemed like an easy solution, and I felt like it would be less complicated. Because the number one thing couples fight about is money, right?
Yet, if I had made that a hard rule – if I refused to ever consider anyone who didn’t make at least an equivalent salary to mine – I would have missed out on so many amazing adventures and happy memories in my life. And as for some of the relationships I’ve had with men who made good incomes? They ended up being incredibly messy. Because while it’s true that our finances and lifestyle compatibility were less complicated, I wasn’t completely focused on the bigger picture. Did I love them – or did I just love the idea of them?
As my last relationship was winding down, I learned a lot about myself and what I was looking for. I learned to look outside the box of what I would normally want in a partner – because the path of unsuccessful relationships I was on was not very fun. I needed to stop checking boxes, and I needed to trust my instincts instead. As for financial compatibility, I decided that all I needed was someone who was good with the money that they earned. It didn’t matter what they did for a living. And whether their salary was $40,000 or $400,000 – as long as they were happy and living within their means, what more could I ask for?
Related: Why I can’t afford to start dating
I consider myself extremely lucky to have met my boyfriend. While he cares (a lot) less than me about his finances, he has a stable job, zero debt, savings in the bank, and is really good at pretending to be interested in the latest evolution of my budgeting spreadsheet. :) He is ambitious, yet realistic in the fact that he took a significant pay cut to take a job that would make him happier in the long run – and I think that says a lot about someone to know exactly what they want.
Even though I understand where that woman in the original article may have been coming for, I don’t support her reliance on someone else to create the life she wants for herself. Because you certainly don’t need a 6-figure salary to live a good life. I’ve spent the last 10 years trying to earn my financial independence. I’m not super smart or well educated or even a very good writer. But I’ve worked hard for the life that I have.
When I was 28, I bought my first home. I saved for the down payment for years, and in the 5 years I owned that home, I paid my mortgage payments on time, traveled to over 20 different countries, and stayed on track with my retirement savings. Maybe this is a super cliche way of thinking, but my financial accomplishments felt like even bigger accomplishments because I was doing everything as a single female.
I don’t really understand why anyone would look for a relationship that includes being financially supported. Sure I understand if you fall for someone who just happens to be wealthy (and also provides you with all of the other things you need in a healthy relationship), but to specifically seek it out seems wrong. I guess I just don’t get why you wouldn’t to experience that amazing feeling of making it on your own. :)
Would you date someone who made significantly less than you?
Would you ever refuse to date someone because they didn’t make enough money?
Note: Sorry in advance, this is a long and rambling post. :)
GMBMFB was one of the first personal finance blogs in Canada. Back in 2007, you could count the number of PF bloggers on one hand. I had a lot to work on financially, and this tiny community helped me out enormously. My life has changed a lot in the last 9 years, but this blog has remained constant. I love that I’ve been able to make friends with other bloggers and readers, as well as create a freelance career that I never thought was possible.
About a year ago I couldn’t help but realize that my life had become easy – I was making a comfortable salary, I was on track to retire early, and I was able to travel a lot. This was what I had been working on for years – ever since I started this blog. So I didn’t feel like I needed more. And because I didn’t need more, I had a hard time writing about all of the things I used to write about – like increasing my networth or finding new ways to earn and save money. Life was on autopilot and my finances didn’t motivate me like they used to. So I took a step back from this blog and stopped writing – promising myself that once I figured out what I wanted to write about, I’d come back. But one month turned into six months, and before I knew it, I had stopped writing consistently for more than a year.
Over the last couple of months, I’ve been thinking about personal finance and blogging again, but from a different perspective. Even though I don’t make a lot of money compared to others, I feel really good about where I am and I know my financial situation is solid. My income is enough to keep me on track to achieve all of the goals that I’ve set out for myself. There are still so many paths that my life could take me, so I’m trying to be flexible and open to everything. Maybe one day I’ll be married. Maybe one day I’ll have kids. Maybe one day I’ll own a home again. Or maybe none of that will happen, and 20 years from now I’ll be happily renting a tiny home and living my life just as it is. Whatever happens, I feel like my current salary could support it.
I’ll be the first to admit that I don’t have it all figured out yet, but that’s what makes life fun. I’ve stopped comparing my life to others, and have learned to enjoy what I have. Earning more money isn’t a priority anymore… which is a weird feeling. And the thought has definitely crossed my mind that perhaps I’ve become lazy, or I’m just not ambitious enough anymore, or I’m not acknowledging my full potential by not pursuing the highest possible income every year. But there’s more to life than just money, and it’s taken me a long time to get here financially as well as emotionally.
Almost all of us have heard about that study by Princeton University researchers where they found the salary sweet spot was $75,000. I’ve been earning around $75,000 since 2011, but I’m a lot happier now than I was back then. In 2011, I had to really fight for that money. I often found myself working 70+ hour weeks, and was constantly stressed out with deadlines on top of my full-time job. Life was messy. Sure, I had the income sweet spot, but where was my quality of life?
After I came back from Germany, I told myself I was never going back to working crazy hours, even if it meant taking a pay cut. And I’ve stayed true to that goal. As I enter into 2016, I find myself working 45 hours/week at the very most, and I predict my salary will be around $80-90k for the year. This is a significant change in the quality of my life, and it’s what I’ve been working towards for years – an income level that is comfortable and sustainable.
There are still a lot of financial goals I’d like to achieve (like becoming a more savvy investor). I’ll still write my monthly budgets for this blog, and I’m still going to make financial goals for myself every year. I aspire to do well at my full-time job, and I’ll pursue freelance opportunities (with a work smarter/not harder attitude). The difference now is that my motivation isn’t driven by making more money anymore. As long as I’m achieving all of my financial goals, my only other goals are to be comfortable and happy.
TL;DR – My new financial goals don’t involve increasing my income anymore. :)