How Do You Not Let Your Expenses Grow With Your Income?

43 Replies

I have found my expenses grew a bit but for the most part, I have what I need.  I don't need a lot and I am not flashy.  I also like growing a bank account more than I like most things, so that makes it easier.  I end up spending money on services that save me time or give me my time back to control.

its all balance and for me you do have to stop and smell the roses and do some things that you like to do other wise whats the point..  And of course i find this very regional as i travel through out the US.. 

LA is not the conservative mid west..  we all have our things.

@Dominik Perrenoud everything is a balance. In your position and most other in the first couple years your expenses will increase to a reasonable level. But the most important is if you able to increases income over the next 3 years and beyond try not to let that increase those expenses. Then you can have a savings over the following 15 plus to save aggressively. Or invest aggressively to achieve FI (financial independence) if that is attractive to you.

A way that I got a hold of this problem was by focusing on my net worth verses my income.

I started this shift in 1999 and I began with a negative net worth. Each month I kept track of all my income/expenses and assets/liabilities. My goal was to break zero ASAP.

By focusing on my financial net worth this helped me feel satisfied by saying no to frivolous expenses.  Skipping a night out at the bar literally meant I might be worth $100 more the next day. 

I still track every personal expense that my family and I make and I could tell you specifically how much we spent in groceries or gas or clothing (ect.) in any given year.  It's actually not difficult and I find it relaxing to do once a month (almost every purchase is on a credit card so very easy to track).

Also, when I have had "vices" I've tracked those as well. For example, I tracked cigarettes separately when I well as alcohol when I went out a lot. Now, beer / wine simply goes in with groceries as no longer is a very large percentage of our budget. 

These days I have a "boating expense". I classify my boat with a value (what its honestly worth) and then any toys, dock fees, maintenance, boat depreciation, etc...goes into my boating expense category. I need to be able to justify that to myself at the end of the year...did I get "X" amount of pleasure from the boat (absolutely). 

I get immense satisfaction looking at my personal balance sheet and watching it grow year over year. And the feeling knowing that I "could" afford to do pretty much anything I want feels so good that I actually don't even need to "do" much...if that makes sense. 

Delayed gratification is the number one delineating factor between the rich and the poor . If you can’t save then the seeds of greatness are not in you plain and simple .

@Dominik Perrenoud I can completely empathize with you on this. For the first time I have started making a decent amount of money akin to yourself and feel the need/want to buy nicer things. The constant idea of 'I could die tomorrow, why not buy it and treat myself' vs 'well I don't really need that, and if I buy it today nothing will change tomorrow.' 

But one phrase has always keeps me grounded when faced with materialistic things- 'Everything in moderation'. I have also found that if you eliminate your big ticket expenses, like rent, or a car payment- you can still afford those little luxuries. Rather than spending 1k a month on an upscale apartment- house hack a duplex, and customize the unit you live in how you like. In turn it is much easier to 'justify' that new car part or expensive meal--- But remember- 'Everything in Moderation'. 

At the end of the day- a nice car part or expensive meal really isn't going to shape your financial future but 800-1000 a month less in rent very well could. 

My thinking about money has changed over the years and will probably continue to change. When I was younger I felt that spending money for things that were not tangable assets was a waste. Vacations and travel were a waste because you had nothing to show for them. As I have aged I have come to realize that experiences are more valuable than assets. Assets can be stolen, lost, seized, squandered. Memories and experiences shape your soul. No one can take them away. Money is important in our society but we pay it too much heed. Honestly, I wish I had spent more time at 25 enriching my life with experiences than worrying about what my life would be at 65. Youth is a time to invest. That needs to be financially and mentally. Make sure what you spend on brings you joy for more than just a few days. I had an experience not long ago that really got me to thinking about the role of money and things. I have started collecting antique bottles and I located one that I wanted very much. I was grousing a bit to the shop owner about the price even though I was going to buy it anyway. He sad, " you know, someone else is going to own that one day", referencing the bottle. It also applied to the $100 I was handing him. Either way I wasn't going to hold on to either one forever. The decision was which would give me more pleasure, the hundred dollar bill or the bottle? I know my opinion here is running counter to most here but there is always a balance to life. If a man is hungry his memories won't feed him. Money also won't feed the soul.

As a good friend of mine said. 

I work to live, not live to work. 

Investments are letting me live more . working has provided those investments.

At 60 I wish I had taken a little more time to live.  but i'm still buying rentals. and feeding my addiction.  :)

Wow, I’m overwhelmed by the number of replies! So much value in there.

Let me try to answer all of them.

*Deep breath*

@Chris Szepessy

Thanks for the tip, I like that idea!

@Christian Montalvo

No, I don’t have that BIG investment goal figured out yet. But I see the point. I should get working on an actual plan for that.
Maybe it would make sense to set aside a certain (relatively small) sum each month for “reward purchases” to scratch that itch somewhat, and when that pool is gone, it’s gone until the next month. I think I might respond well to that.

I also like the approach in “Your Money or Your Life”, where you calculate your actual income per hour (minus all the expenses it costs you to get to work, look nice for it etc.). Then, when you want to buy that next “reward”, stop and think about how many hours you have to work to be able to afford it. Makes you think twice, but I haven’t internalized that yet.

@Alan Pederson

Yeah, it definitely comes down to the mindset. I guess I am lacking the long-term perspective because I have only been earning a noteworthy income for a little more than half a year. I keep deluding myself by telling myself, “After I buy this thingy (e.g. the car), I won’t be wanting anything else for a while.” But sure enough, only a couple of weeks after the purchase, I was already looking at all sorts of modding parts on the Internet.

I guess this ties up nicely with the long-term goal/strategy @Christian Montalvo was talking about. Once you have that in order, it becomes much easier to put that money away.

@Jessica King

Yes, Rich Dad Poor Dad is very inspiring. Luckily, these days there are other ways to get into real estate, such as renting apartments and subletting them via AirBnb.

@Doug Pintarch

“I'm in the car business and don't like cars”, interesting approach to career choice :-)

But seriously, I admire that mindset that you don’t like spending money! How do you manage to get it, though? Because as you say, you work long and hard for it in a job you don’t particularly like. Many people would want to “reward” themselves lavishly and regularly for working like that. Is it all habit from earlier in your life?

@Joe Splitrock

You, sir, are absolutely spot-on! I actually started looking at apartments after I helped a friend move into a place much nicer than mine… I also moved into my current place after a similar experience a few years back. In that instance, I managed to upgrade the apartment without paying more rent, but the trigger was very much the same. Good thing I’m hardly ever on social media, or I would probably be much more hooked on spending.

But it works very much offline as well. A good friend of mine seems to have at least three vacation trips planned at any given time and they are still studying. I’m very happy for him that he can that (and I wouldn’t want to travel around that often anyways). It still makes me feel somehow inadequate and leaves me wondering how he can afford that (it's not his parents).

I know this kind of thinking is ridiculous, yet I can’t escape it. Reading through this thread is a great help, though, like the following of your quotes:

“So the answer is not to deny yourself anything, It is to make careful purchases that add value to your life.”

“Most people driving fancy cars and living the high life are generally broke living paycheck to paycheck.”

I don’t have anything to add to that. Amen.

@Bob Woelfel

“I started asking myself when it came to big purchases if that purchase was going to get me closer to my goal.”

This ties up nicely with earlier posts and I will definitely sit my butt down and work on actual goals and the steps to get to them. This should help a great deal in keeping perspective.

“What opportunities are you giving up by doubling your rent payment or spending the 3k? If I buy this now then maybe I can't buy something else I might want later.”

Thank you, that is exactly the kind of thinking I want to incorporate. It’s there on the surface, but much like the little angel on a cartoon character’s shoulder, it gets pulled down by the little devil on the other shoulder.

I will definitely get behind the numbers on this!

@Anthony Wick

Very true. I don’t have a partner, but being on the same page financially would definitely be quite high on my list for any long-term relationship.

@Steve Vaughan

"What will this purchase be worth in 3 years? 5 years?" "Will this purchase take me towards freedom, or sign me up for more years in the rat race, running on my little wheel?"

I am starting to see a pattern here :-) Thank you for your perspective on this!

“After reaching a savings/debt-reducing or investing goal, reward yourself in some way. A $3000 car appendage will never make sense financially, but as a reward for saving 5x that first, you will build good habits.”

Very much liking this idea! Will incorporate it in my planning!

@Roger Steciak

“Now that I can afford several TVs, I've figured out there's nothing on TV (except for PBS) worth watching.”

Haha, what a revelation, both in a literal sense and a figurative one. After getting that doodad you just had to have, you usually don’t really appreciate it and are already looking for the next one, keeping you in the rat race… Definitely seeing myself in this one!

@Saj Shah

True, however, I prefer the problems of having too much money to those of having too little of it :-) 

@John Thedford

Not helping me here :-) It’s a Honda S2000, and yes, the wing would look great.

@Matt Faix

“It might feel like a sacrifice now by not having the $3000 wing, but the bigger sacrifice is not having the life you want. “

That is exactly the mindset I want to get from the surface, where it is now, into my subconscious!

@Frank Wong

“Maybe in your case, you can see if someone is selling a used carbon fiber wing”

Yeah, there are lots of used parts around and I very much like buying used. In fact, I buy a lot of otherwise expensive stuff used, e.g. electronics or the car, at a fraction of the retail price. The exact price of the stuff is not the issue, as I could afford to trick out the car after two months of saving or so.

The problem is the mindset behind it. I don’t wanna be spending money that doesn’t get me anywhere, be it $500 or $5000. I see your point of “getting it out of your system”. With the car and modding it, the “problem” is that I have been into cars since I was like 12. So now that I finally got one, the kid in me feels cheated if I don’t modify it.

But yeah, I like your idea. I will combine it with the “reward for reaching a savings goal” by @Steve

@Michael Ablan

“…I spend my money on them because doing these things bring me joy. There's no reason to work this hard if you aren't using money as a tool to do the things you enjoy.”

Yet another approach and I like it! I will make a list of things that I really appreciate and want to spend money on. Anything that’s not on the list gets dropped!

@Arlen Chou

Thank you for these insights! It’s true, I haven’t yet had that “holy crap” moment that puts everything in perspective yet. Hopefully it’ll come soon. Maybe when I’m going through all the helpful tips in this thread.

@Kelly I.

Yes, the people in this forum are just amazing! It’s inspiring to see how other people are managing to pave their way to financial independence. I’ll be sure to check this movement out!

@Ernesto Hernandez

That’s exactly it! I haven’t yet made my mind up about concrete goals. I just want “financial independence” at some vague time in the future. I’ll get a lot clearer on these goals and how to get there.

@Mark Gonzalez

Also a very good point. I haven’t considered that when I bought my car. But I think, it being a Honda S2000, the price might actually go up at some point as it’s rather popular. hasn’t been in production for ten years and prices have remained rather high.

Thank you for this insight!

@Griffin Thomas

That makes sense! I’ll add it to my list.

@Ty Zaczkowski

True. I believe I need to get my mindset in order before building discipline. Because if one is still drawn to “doodads”, not buying them requires willpower, which depletes over time. But if the mind is properly set on financial goals, you serve yourself by not buying useless crap and don’t feel any pain for doing so.

@Josh Kredit-Phelps

Yes, it’s become clear to me that my goals have been much too vague so far, diluting my efforts to get there. First step, I’ll have to get clear about the goals, steps to get there and the time frame.

@Jay Hinrichs

Yes, it seems sensible to actively allocate some of your income to “smelling the roses” kind of activities in order to get the right amount of reward and satisfaction while at the same time not binging on crap that doesn’t give you anything back…

@Derek Wissner

I like the idea of tracking your spending/income down to a T. I actually did this for about three months after reading “Your Money of Your Life” but then found it too cumbersome. How exactly are you doing it? Excel entries, pen and paper?

“I need to be able to justify that to myself at the end of the year...did I get "X" amount of pleasure from the boat (absolutely). “

I also like this one very much! I’ll work out some sort “pleasure-o-meter” for the most common “doodads” I’m likely to buy and then evaluate up to what price the pleasure I get from it is worth it.

Thank you very much!

@Dennis M. 

“Delayed gratification is the number one delineating factor between the rich and the poor.” Yes, I think that cuts to the heart of it! With having started making a real income just a bit more than half a year ago, I can’t yet delay that gratification. I’ll have to work on that.

@Michael Doherty

Thank you for this advice! The idea of basically having a budget for little luxuries has come up in earlier posts as well and like it. Will definitely incorporate it in my financial planning.

@Don Gouge

Thank you for providing your perspective on this! It is true, experiences shape a person much more than thing. Plus, most things that are commonly referred to as “assets”, such as cars or one’s primary residence, often are the complete opposite of an asset.

“Make sure what you spend on brings you joy for more than just a few days.” I’ll definitely consider this in my planning as well!

Thank you all again for your insights and tips!

I feel so ridiculous, because I am now at point in life where I could save loads of cash. With relatively low expenses and no debt, I am able to save over 40% of my post-tax income every month. Yet most of my money-related thinking goes to what idiocy I can throw that money at next.

Reading through all your posts has already helped me a great deal though! I the next days and weeks, I will definitely implement many of the strategies discussed so far.

Thanks to reading all your answers, I’ve already made a small step forward today. I wanted to visit a garage to check out modifying options for my car. I’ll stay away from that garage now :-) 

P.s. Holy crap this thread has already been better than anything I could’ve imagined! So much good information in here. I will keep the next weekend completely activity-free to focus on incorporating it all into my life and get a proper planning together!

Thank you so much.

@Dominik Perrenoud ,

   That's an easy one regarding my career choice.  Long story short, I couldn't hit a curve ball in high school, here I am 30+ years later.  I haven't owned a car since 1989 and don't like talking about them, giving my opinions of them, driving them, blah blah blah.  It's just what I do for a living. I handle the financing for the dealerships I work for.  I don't even entertain the thought of selling cars to relatives and friends, with the exception of my wife. I am totally jaded from doing this.  When we ask a potential salesperson why they want to do this and they answer "Because I love cars and..." we say "NEXT"..

   Anyway, I don't do the lavish reward thing either, that's from growing up on the poor side of middle class, when you never have a new car or swimming pool or an annual Disney trip... you don't miss it.

@Joe Splitrock absolutely nailed it in his first paragraph.  I see it every day.  In fact I could even make a mantra out of it -    "Stupid Americans pay my bills"

Read The Millionaire Next Door. It'll cement with data what everyone is advising you. 

Originally posted by @Dominik Perrenoud :

@Steve Vaughan

. . . “After reaching a savings/debt-reducing or investing goal, reward yourself in some way. A $3000 car appendage will never make sense financially, but as a reward for saving 5x that first, you will build good habits.”

Very much liking this idea! Will incorporate it in my planning! . . .

With a little bit of planning and some luck, you can actually indulge yourself from time to time with "free money."

I include a line in my monthly budget called Contingencies ($100, or whatever amount is right). This line item is for those known but unexpected expenses that always come up when you least want them to (new car battery, new washing machine, whatever). If I haven't needed this money by the end of the month because nothing came up, I have the high class problem of deciding what to do with it. Save it in case the expense comes up at some point in the future; invest it so the money compounds in the coming years; donate it to a worthwhile charitable cause; spend it on some toy or doodad that keeps burning a hole in my pocket; whatever.

By including the money in the Contingencies category, I've already "spent it" on something. I just need to figure out where the unspent portion should go at the end of the month.

Last year, I felt a strong urge to buy a smartwatch. I budgeted $500 for one, but to remove any feelings of guilt, I transferred a separate $500 into a savings account. When I eventually figured out I had gotten this far in life without a smartwatch, I removed the item from my budget, but left the $500 in savings. It turned out to be the best smartwatch I never bought.

I bought my 911 S Cabriolet used with 19,500 miles. Saved about half the cost of a new one:)
Sometimes you just have to treat yourself!

Originally posted by @John Thedford :

I bought my 911 S Cabriolet used with 19,500 miles. Saved about half the cost of a new one:)
Sometimes you just have to treat yourself!

 Now you put a gun to my head and tell me I have to like a car....I'd pick that one!

Lot's of great advice here - just like the seminars and books you read, you have to be committed to following and implementing what you've learned.  So many potential investors read, read & read and go to seminar after seminar but never buy a property.  Learn from your life experiences and mistakes.  I had an amazing life going by any definition until I lost my job at an age where it wasn't so easily replaced.  I never tracked my expenses and didn't save a whole lot because I made great money.  There is a balance to be created between enjoying the fruits of your labor and saving as the squirrel does for the rainy day.  Once I lost the  job and bunch of other "assets" I had to start over from rock bottom....literally nowhere else to go but up.  Now, I drive an much older car that I got from a tenant who didn't have cash to pay the rent for a couple of months.  I fixed it up and actually love being able to park it anywhere and not worry about a dent or ding.  I started buying clothes from goodwill at rock bottom because I HAD to but have continued that habit.  I'm very much a saver today and only spend what I need to with the occasional splurge for a quick trip to the beach or a great bottle of wine.  I now save 50% of my income and push it back into a diversified pool of investments.  I keep some rentals that are local to me so I can always drop by and the rest of my investing is into other people's deals where I am earning 8% to 20% without having to do much work.  As you get older, you appreciate passive!  We truly do reap what we now, build now while you are young and spend from investment income not active income or savings.  You won't regret it.  Spend some time voluntering at a nursing home and you'll learn many lessons - I did so in my younger years but didn't apply those lessons until my later years.  Trips are great but you'll be better served by having great conversations with good friends!

What a great question.  I see the same issue for my family - we lived on practically nothing for several years, in a tiny home.  Income went up, bought a larger house (rented out the old one at least), newer car, more stuff, nicer is tricky.  I think second the point by @Bob Woelfel :

"The goal of what you are trying to accomplish has to be bigger or feel better"

There has to be a 'carrot' that is enticing enough to you that if you focus on it you are willing to forgo other luxuries.  

Then avoid the temptations by avoiding the websites/discussions/books that make you want to spend.  Instead get inspired by the websites/discussions/books that remind you of your longer term goals.

This thread is a great reminder for me to identify that 'carrot' or goal, and to stay focused on it.  Thanks.

@Doug Pintarch

I see, makes sense. Except for the one with the curve ball, what does that have to do with the rest? 

@Ernesto Hernandez

Thanks, it's on my list for the next Amazon package.

@Roger Steciak

I like the approach of making yourself put the same amount of money you want to spend on a doodad into a savings account. Makes you think twice about the purchase!

I'll definitely include some variation of the strategies in this post into my own planning!

@John Thedford

Can't say I'm with you on the choice of car, but definitely with the sentiment behind it.

@Rick Johnson

Thank you for sharing your story! It sounds like you've had your holy crap I have to change moment and developed some very solid financial habits out of it. 

Spending from investment income rather than active income seems like a very solid strategy to me - It prompts you to think long-term and look for investments rather than doodads.

@Tandi H.

"There has to be a 'carrot' that is enticing enough to you that if you focus on it you are willing to forgo other luxuries."

Yes, that is exactly it! It's become clear to me that my next/first step must be to define that carrot for myself. Then everything else will fall into place much more easliy.

Its tricky! I went thru something simliar. What worked for me is that I started saving first and foremost, and watching the savings grow (with an end goal of what that money will be used for ie REI etc) then it became exciting to see the money increase and I wanted to save more!

Then, I allowed myself x amount of “fun” money each month.  This way i can use it to buy stuff that makes me feel like I am rewarding myself. My mentor said to pick a number and save that each month just like your savings but you can use if to satiisfy the crave for upscaling your lifestyle.  

Both of those should help hopefully.   And once you see how powerful saving is you will want to stick with it!

Good luck ;)

@Mary Mitchell

Thank you for confirming my intention! These are exactly the areas I need to get working on - real goals and some fixed amount of "reward money" each month. That way, I won't feel like I am missing out while still building savings.

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