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One of the most common reasons people give for not investing is that they simply don’t have the money. They believe that once they earn more, they’ll finally have the capacity to start putting money aside for the future. But if we look at our spending habits, we’ll see that this reasoning is flawed. The problem isn’t a lack of money, it is how we allocate what we have.
The Cycle of Lifestyle Inflation
As our income increases, our expenses rise alongside it. This phenomenon, known as lifestyle inflation, is why many people, despite earning significantly more than they did in the past, still feel like they’re living paycheck to paycheck. The nicer apartment, the fancier meals, the latest gadgets, and the more frequent vacations all seem justified as rewards for working hard. Over time, these “upgrades” become necessities, and soon before we know it, we are spending everything we earn.
If we don’t make a conscious effort to save, no amount of income will ever feel like enough. There will always be another expense, another want, another reason to push off investing.
The Reality: We Can Live with Less
The reality is we don’t need as much as we think we need. Many of the things we consider essentials are…
