Finance Tip Friday #76: Why No One is Immune from Budgeting

Piggy bank and budget money.

As high-income earners, it’s sometimes easy to forget how privileged we are when it comes to spending money. Since starting my nurse practitioner business, I’ll admit that if I see something I want or feel like taking a well-deserved vacation, I will.

And why not? I’ve got the money, right?

The problem is that this line of thinking can be a very slippery slope. I can’t tell you how many times I’ve seen people spend themselves into a hole despite earning what you and I would think of as an obscene amount of money.

I remember one guy I worked with who was earning well over a quarter of a million dollars per year. Yet, he was in his sixties and worried he would never be able to retire. Why? Because he wasn’t sure how he’d ever be able to afford his lifestyle otherwise.

It just goes to show you that no one can break the one true fundamental rule of personal finance:
Income > Expenses

To keep myself from falling into this trap, I have a simple strategy: Spend as much of my money as possible on assets rather than “things.” This accomplishes two goals:

-It reduces my discrepancy income leaving me with less money to spend frivolously.

-I own more assets that can be sold at a higher price or have the power to generate income on their own (such as dividend-paying stocks). In turn, this puts more money into my pocket and helps to build my net worth.

I encourage you not to fall into the trap of becoming too comfortable with spending. It’s easy to think about how much money you make in a year or see how others spend and say to yourself, “I can afford this.” However, we must always respect the proverbial laws of financial physics and pay attention to our budgets – no matter how much we earn. Psych yourself into doing this by buying more things that will ultimately increase your total net worth and create more financial redundancy.

2 Responses

  1. Wow! I draw from the wealth of this wisdom and truth. Thanks for always empowering us. God bless you always. More grace abound to you sir.

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