Making a Lot of Money: The Opportunity to Not Be Broke

Making a Lot of Money - rows of piles of 100 dollar bills

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I hate to be the one to break it to you, but making a lot of money does not guarantee that you will have financial success. Of course, it could mean that you reach financial greatness. It is possible that you make enough money so that all of your dreams come true. Yes, making a lot of money can be a great thing…but only if you play your cards right.

Making a lot of money is not the sure thing that many people make it out to be. In fact, making lots of money could also mean that you end up broke, flat on your ass, and moving back in with your mom. Why? Because making a lot of money only gives you the opportunity for success. It guarantees nothing. Making a lot of money gives you the tools for success, but there are a lot of pitfalls and ways for people to go astray. Avoid these mistakes, and you could end up very wealthy. Give in to them, and you could end up just as broke as the rest of us.

Many of the choices that you make will affect your ability to build wealth. Some of them are avoidable while others aren’t. With that being said, I definitely think its worth taking a minute to investigate some of these options.

Where You Choose to Live

When Greg was living in Chicago he lived in the beautiful Wrigleyville area. It was awesome. There was all kinds of wonderful things to do, all within walking distance. Unfortunately, a tub of Country Crock cost $8.00. Greg’s crappy second floor apartment building with no air conditioning cost him over $500 a month ($1,500 total) for one miserably tiny bedroom. If we would have stayed in Chicago, a considerable amount of our income would have went toward housing and cost of living. We never would have been able to save as much as we are saving now. Luckily, we moved somewhere much more boring, and thus much more affordable. (I guess that’s why they call it “Naptown”.)

Lifestyle Choices

For some people, getting a raise at work simply means upgrading what they have and finding ways to spend more money. For others, an increase in income means buying a bigger house and a newer car. For frugal geniuses like the people who read our awesome blog, getting a raise means an opportunity to save and invest more money. I personally know people who make twice as much as we do, yet they live paycheck to paycheck. The reason is because they simply spend it all. Their budget is not really a budget. It doesn’t take on any sort of written form. To them, a budget means trying not to spend more than what they made that month. Is it any wonder that when a financial crises comes up in their lives, they are caught totally unprepared?

Expensive Hobbies

Even when one’s financial house may otherwise be in order, it can be hard to get ahead when you have expensive hobbies. For instance, golfing can cost a hundred of dollars a month – or more! Mountain climbing can costs thousands of dollars in equipment and travel fees. A love of the water can cost an arm and a leg. Do you enjoy boats? Do you enjoy jet skis? They are all expensive.

These are just some of the ways in which you can completely reverse the effects of making a lot of money. If you think that making a lot of money is the cure to being broke, you need to think again. If your lifestyle outpaces your paycheck, you really aren’t making any more money than the rest of us. In fact, you may be spending yourself into the poor house. On the flip side, if you are a good steward over your money, you can increase your net worth by practicing some spending restraint. You may become wealthier than your friends who are making twice as much money as you are. It’s really not about how much money you make. It’s about how much you are able to save!

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  1. You hit the nail on the head – when people earn more, their lifestyle generally matches to suit their new income.

    I know so many people who earn considerably more than I do, but never have a dollar to spare.
    Many of them wonder how I have paid off over half my mortgage in less than 5 years. Everytime I get asked I spruik the virtues of saving, and how every dollar I pump into my mortgage saves me interest for the life of that loan.

    Great article, keep up the good work 🙂

    1. Yes, beware of lifestyle inflation!!!!!
      It creeps up on all of us sometimes =)

  2. I think you hit all the major factors. You can live in a huge house in Wichita, Kansas, for the same price you can live in a tiny one bedroom apartment in NYC.

    I gave up golf and snowboarding for now because the costs were just too much. I would also like to do those activities with my wife, but we’d have to buy her equipment since she doesn’t have any yet. Hobbies can have a big factor on your bottom line!

    1. A big one around here is golf. It can cost hundreds of dollars a month to play every weekend. Luckily we hate golf so we aren’t tempted to play =)

  3. Hobby is an easy to forget. I’ve tried to be a “collector”, but then I realize it takes spending money to be a collector.

    Something else that can be included in lifestyle when people want that bigger house: bigger utility bill, more taxes, higher insurance costs, and you have to furnish the big house.

    1. Yes, exactly. And you have to clean and take care of that larger home which either costs more time or more money to pay someone!

  4. Lifestyle inflation can ruin your financial health, especially since you are not able to go back to a lower living budget, should you lose your well-paid job. You did the right thing leaving Chicago, when I see many people barely making it in the big cities I wonder why they stay, unless you are a high star lawyer, surgeon or a trader, you can surely find a similar salary in a much cheaper town.

    1. Yes, I totally agree. I remember buying him a case of water at the supermarket in Wrigleyville for $10. What the hell!??!?!?!

  5. I couldn’t agree more. All too often I think what gets people in this situation is not having a long term view of things. Sure, it’s great fun to travel or spend vast amounts of money, but if it means that I’ll be eating Ramen for the rest of my life then it really isn’t worth it.

    1. I agree. You have to find a balance where you can have fun now but have money to have fun later too.

  6. Some great points here Holly. Mrs Scot and I have bought a house in the London area. While this is not where we want to retire, we see it as a very good investment given the constistent high prices in the area. One day we will sell and buy somewhere in a cheaper area.
    I like your reference to hobbies. We are both mad into Scuba Diving, Wakeboarding and Cycling. None of these come cheap and the equipment is ridiculously expensive as well! The more we get raises, the more extravagent dive sites we visit / more weekend wakeboarding trips we take. I need to be careful with that one – Cheers!

    1. Hey, as long are you aren’t charging it all, you are doing better than most!

  7. This is something that we need to keep in mind. Lifestyle inflation seems to be getting ahead of us!

  8. You can try to modify expensive hobbies to make them cheaper. Mr PoP likes working on engines – instead of cars, his most recent project was a lawn mower engine =) Plus we got to deduct the expenses since it became the lawn mower for our rental duplex when it was done.

  9. Great point. We have tried quite hard to not succumb to lifestyle inflation. We still use the same budgeting methods we used before. Now we just try to save more. It isn’t easy though. Those wants can be pretty tempting.

    My hobbies sometimes cost a bit more – I love to travel but we make room for this in our budget so it never costs an amount we can’t afford.

  10. I found when I was making more money, I banked as much as I could, but that was because I was paranoid about layoffs and financial hurricanes. Turns out it was a good idea as. . .I did get laid off and was out of work for six months!

    1. Well, you are smarter than most! Most people would just spend it!

  11. I am in a position where I can’t spend any extra money, but I will definitely be wary of lifestyle inflation, because it is something that attracts me. Especially since we are in a home/neighborhood where the people surrounding us had to bring in a mich higher income to get there and I also obsess over nice cars. I think after almost 5 years of super frugality, though, I don’t see myself giving in because I know how stupid it is.

  12. Where you choose to live can certainly make a difference. We live in a place with cheap cost of living, so we are able to do some of the more expensive hobbies. Nothing ever has to be sticker price either. You can always find deals or go do hobbies at off times to save money.

    1. We live in a cheap area too. It sure makes things easier.

  13. Definitely agreed that making more money doesn’t help you one bit if you don’t know what to do with it. It’s really just as simple as spend less than you make, and save/invest the rest.

  14. I would hardly say Indianapolis is boring… you just have to look a little harder to find excitement sometimes.

    I am glad we settled here, the prices are good the people are nice, and the neighborhood we live in definitely doesn’t have a keeping up the joneses attitude. The only downside is sticker shock when I go to larger cities, especially when it comes to parking. Oh Indy, you have me so spoiled!

    1. Oh yes, I hear ya!

      Greg and I stayed in a hotel in downtown Chicago one night and I distinctly remember that the overnight parking was $38. I could not believe it!!!!

      Yeah, I guess Indy isnt’t that boring. I think that I’m just getting old and boring! You’re right- there are plenty of things to do if you look.

      1. It is now about $50 to park overnight in downtown, and they may even run your car into a pole like they did for me last year… 🙁

        On another note, you are dead on your post above. Clearly anyone who has a job can save some money by just maintaining a strict budget. Although having a lot of $$ and a strict budget is probably the best.

      2. Hooray Indy! Second day reading the blog and now I find out you guys are in Indy too?

        I agree the cost of living is fantastic, and we’re dealing with the exact same thing with our house, simultaneous hatred with certain aspects as well as toying with what school district we want our 2 year old in..

        We moved here for the schools and now I’m starting to question it.. 3 more years to figure it out, but I must admit I am so tempted to house hunt!

        1. Are you in Indy? We have a few readers from our area. We are actually in the suburbs….but we are close enough to Indianapolis that we usually just say we are there. =)

          We are in the same school district predicament. Really, there are probably no **wrong** choices but our kids lives could turn out entirely differently based on which school system we settle upon and where we live. No matter what we do, we will probably wonder if we are doing the right thing!

          It’s hard to decide….Our kids are 3 and 1..and I want the best for them! At the same time, we are now living in the school district that I went to, and I seemed to turn out ok=)

  15. I’m totally in agreement with you about getting a raise. I remember reading about it in financial books that once you get a raise the only way to actually benefit from your higher salary is to not change your lifestyle but put the excess money in the bank or invest it!

  16. I like the imagery (not exactly how you phrased it but similar) of a healthy income as one of many tools you need to become wealthy. Avoiding the other things you mentioned is another skill!

  17. The key to success is to realize: you’re either a debtor or an investor. There is no other option. Until you embrace that financial independence doesn’t exist without investing in something, you’ll end right up as a debtor. Income from labor evaporates at some point… it’s inevitable. The only source of income that can carry on forever is income from investments…

  18. Derek - Freeat33 says:

    One thing that worked great for me, was that I worked in construction. Good money but seasonal work meant possible layoffs. Since I knew this was a serious threat , I planned on keeping my expenses matched with what I would get from unemployment. That way if I got laid off I would be able to continue paying my bills and mortgage while I looked for more work. Whatever trick you can play on yourself to keep your own spending in check.

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