- The Jefferson family makes $60,000 a year. The Jefferson family spends $60,000 each year. Every year they end the year in the same spot, broke.
- The Smith family makes $40,000 a year. The Smith family spends $40,000 each year. Every year they end the year in the same spot, broke.
It seems like one of these two households should have $20,000 just setting around at the end of the year. That is a huge amount of money. $20,000 over a 30 year period of time is $600,000. Imagine how much that would be if invested at only 6%, imagine 10%!? Imagine a few raises here and there. Where did that mysterious $20,000 go? How can one family make $20,000 more then another and yet they both end the year with the same amount, zero? What was the point in making that extra $20,000 if you have nothing to show for it. I would rather take a $20,000 cut in pay and have 8 weeks of vacation.
Lets solve the $20,000 mystery.
The answer is simple and two fold:
- Whatever the amount of money you make, spend like a family that earns less, way less. The 40k family survived, met all of their needs and lived to tell the tale. The 60k family can live the same way. If the 60k family set up their entire living situation and expenses identical to the 40k family, BINGO. Same car, same house, same clothing, same vacation. The amount of stuff available for sale out there is endless, you must put restrictions on your own lifestyle, no one will do it for you.
- Just because you earned it, does not mean you have to spend it. In other words, just because you can ”afford” it does not mean you must buy it. If you spend every dime you make, you have bought lots of things that you can’t afford, it just felt like you could because you had the money. (had)
This is actually the tale of one family that always spent every dime they earned no matter what. Good luck.