The #1 Mistake People Make When They Earn More Money That Keeps Them Broke

mj harris

When you make more money, resist the temptation and pressure to upgrade your lifestyle further if you’re already living comfortably.

Here’s a good video on frugality/sensible spending that I found on YouTube that I wanted to share with you.

MJ Harris does a great job here articulating how earning more money can tempt you to overspend, which can easily put you in a worse position than when you had less money (and were more careful about your finances.)

When you make more money–whether from a job promotion, an investment gone right, or a lucrative client in your business–your natural response will probably be to upgrade your lifestyle. There are two main motivations for this:

  1. To signal to others that you are now on a higher level financially.
  2. To reward yourself for your accomplishments.

While I find the first reason (signaling) completely unnecessary and therefore skippable, the second reason (rewarding yourself) is understandable.

However, it is very easy to go overboard with rewarding yourself if you allow yourself to get too euphoric about it.

For example, if you go from making $30K/year to making $100K/year, you will naturally be tempted (and encouraged by others) to upgrade your car, move into a nicer home, and buy more expensive furniture. You’ll want to upgrade your wardrobe, go on more vacations, and spend on things you normally wouldn’t have because you were lulled into a false sense of security by your increased income.

This is a trap you must learn to avoid because if you don’t you will end up wearing “golden handcuffs” living from paycheck to paycheck, working at a job you hate but can’t quit because of your burdensome lifestyle.

Consumerism is a trap. Advertisers don’t care about your financial stability; they just want their businesses to make more money. Most people you work with don’t want you doing better than them, which is why they would love for you to overspend so that you can never be financially free. That way, they can feel better about their own financially-burdened lives (misery loves company.) When people guilt you or make you feel like a cheapskate for saving your money and being frugal, don’t listen to them. If you were living just fine on $60K a year, don’t upgrade just because you’re now making $100K.

If you don’t want to be broke like everyone else, then you must learn to enjoy seeing money in the bank simply pile up. That pile of money will afford you a peace of mind that an “upgraded lifestyle” never will.

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