The Big Lie is that creating a higher standard of living leads to a higher quality of life.
Having more money or nicer things allows you to pay for nicer things and borrow more money, but doesn’t mean you will have a better quality of life.
We are made to believe if you raise your standard of living (with nicer, more expensive things) it will lead to a better quality of life. This is what we are sold every day. Every ad you see sells you on “buy this and your quality of life will improve”. Lies! You lose when you succumb to the glitzy ad that gets you to part with your hard-earned money for something that is a “want” confused by advertisers to be a “need”. I am aware of this, but I still lose the battle from time to time. It’s a daily decision-making battle to say “no” to impulse buying in an effort to improve your standard of living and get the instant gratification from a purchase that fades away soon after.
The bigger the expense the potentially greater negative impact it can have on your quality of life. The single biggest obstacle to a high quality of life is taking on a large mortgage relative to your income. When we do this, we become a slave to paying a big mortgage, big property tax, furnishings and the hidden costs of keeping up with the Joneses. Keeping up with the Joneses might also include buying pricey cars, probably the best way to illustrate a high standard of living through purchase, but no additional quality of life. In the book The Millionaire Next Door, they use the phrase “Big Hat, No Cattle” to describe people who have funded their standard of living with debt.
At the risk of repeating myself, look at your financial situation. Despite having a higher standard of living than you have ever had before, does it seem like you earn “enough” money to be financially content? Chances are your family income is a lot higher than it was a decade ago, yet you still have money worries. Do you ever wonder how you got by on so much less?
Chances are you fall for the Big Lie: Raising your standard of living = better quality of life. You’ve been deceived. You fell for the sales pitch “buy something nice (car, clothes, tech gadget, etc.) that you can’t live without, and your quality of living will improve”. NO IT WON’T.
You are living on a percentage of your income, right? Any idea what percentage that is? How much of your hard-earned income actually stays in your name?
My clients that earn $250,000/year feel just as much pressure as those that earn $100,000/year. More money = more problems for many people. This is especially true when you borrow your way to a higher standard of living in an effort to obtain a higher quality of life. The Big Lie. Are you a slave to money/debt? How much do you worry about money? How are you going to pay for all the obligations you have created? More money, more problems.
Do not allow your income to be the sole driver of your spending. Take control over your spending.
DEBT FREE = LOWER standard of living = GREATER quality of life.
Solution: Open up some space between your spending and your income.
What can you do?
- DECIDE – It’s about discipline. You are not going to live this way anymore – take responsibility
- CREATE A BREATHING ROOM GOAL – Write down a number. What % of your income will you save? Have it pulled automatically from your checking account every month.
- SPY ON YOUR MONEY – Track your spending for two months (use Yodlee, Quicken, Mint online software, or just write it down on paper). You need to know where your money goes and this will help make it easy.
- DEVELOP A DEBT RETIREMENT PLAN – my happiest clients (that chose quality of life) are debt free. They have paid off their mortgage or kept the payment very low and they do not have car loans.
I would love to hear what this post made you think about; the good decisions and the regretful ones, so please comment below…
Don’t Have a CFP® on your team? Click on the link below if you are interested in designing your own FREE financial plan. This is an amazing opportunity to create your own custom plan from wherever you sit with your computer.
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Source: Andy Stanley’s “Breathing Room” Dollars and Sense Part 3 lecture.
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