Do you make a lot of money or do you just think you do?

17 Comments

“A lot” is a relative term, and not to be confused with “Alot” which is both a grammatical error and a mythical beast.

What constitutes “a lot of money” depends on:

how much money you already have

how much money you need 

and

your ability to reconcile your behaviour with basic math

Sometimes it’s easy to think you have a lot of money if you have a large amount saved or invested in assets. But the reality is that even if you own a million-dollar house, if your salary is only $20K you can’t live a million-dollar lifestyle.

It’s an even bigger problem if you are already trying to live a million-dollar lifestyle on a thousand-(or even hundred)-dollar income. However, there’s some forgiveness to be had here since cost of living is as much dictated by geography as your penchant for luxury goods. There’s a significant cost difference when you compare living in a small town to trying to claim some apartment space in an overcrowded city. Nevertheless, it’s easy to get swept up in what we “need” to buy even when we can’t afford it.

When it comes to debt, it’s easy to be accusatory and insist people were living beyond their means on purpose.

But when some indebted people say “I just don’t know how this happened”, I kind of believe them.

When people think they have or make more than they do, or when they don’t have a solid grasp of what’s an appropriate cost for a certain service or material good, they will spend accordingly. From my own calculations, I only took home about 60% of my paycheque at my old job, and the rest went to things like income taxes, union dues and mandatory employer retirement plans. I did the math because I knew, deep down in my heart of hearts that I was spending like I made my gross income and not my net, and if I didn’t immediately change my behaviour, I was going to find myself in debt again and fast.

I think it’s pretty easy to think you make a lot of money, and much harder to actually make a lot of money.

So what can you do? Figure out how much you actually have and how much you actually make. This means taking stock of how much money is accessible to you, and how much is left over after other taxes and deductions from your regular pay. When it comes to finding how much you actually need, be realistic: you need a place to live, but you don’t need a 4,000 sq ft home with granite counter tops and an indoor pool. Keep track of what you spend and inform yourself so you can find the lowest price, especially on regular costs that can vary tremendously like car insurance or cellphone plans. Lastly, accept that when it comes to your income, you actually make less than you make. Figure out how much of your paycheque is actually yours after taxes and deductions, and adjust your behaviour to fit those numbers.

So tell me readers, do you make a lot of money or do you just think you do?

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17 Comments. Leave new

  • If you base your budget on your gross, instead of your net, you will fall short. About a third of our income goes to uncle Sam.

    Reply
  • Haha, I know I don’t make a lot of money at all. But it’s enough money for what I need and to make slow progress, so I’ll take it. 🙂

    Reply
  • Haha, I make a lot. That said, not a lot compared to some others. Compared to the overall population, especially when adjusted for age, I do pretty darn well.

    Reply
  • I think also when people internalize that they ‘make a lot’ they think they deserve to spend a lot and to have luxury clothes, goods, etc that are supposed to make other people think they ‘make a lot’

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  • I make basically nothing right now, so anything would be “more” (a close cousin of “a lot”).

    Reply
  • As it stands? On average I am making less than I did at my original job!!!… but then again I am not working, so if Time = Money, I am making a lot of time. 😐

    Reply
  • I make an average salary and save a good portion of it, so it feels like I’m making more than I am. The ability to save is far more satisfying than the ability to spend.

    Reply
  • I think compared to some people I do make a lot of money, and compared to others I don’t. It’s all relative. Compared to average incomes for Canadian singles, and even Canadian families, I earn well above the average. I don’t spend as though I have a “million dollar lifestyle” however… I spend on variables what I feel comfortable with, and I save a significant amount of each paycheque, usually in the area of 30-35%.

    Reply
  • Knowledge is power! You should never let yourself fall into the trap of “I don’t know what happened” You are right, its easy to lose sight of what you are making. People need to take charge and really figure it out!

    Reply
  • I think I’ll always think I’m poor, even if one day I’m wealthy. That’s how me and my HB were raised (well, not poor exactly, but couldn’t afford trips to Disneyland, and I had to wear a lot of hand-me-downs), and that’s just kind of the mindset we still have. It works for us because we never feel like we have to keep up with the Jones’ or care what other people think.

    Reply
    • I was raised the same way but it kind of gives me a thirst for more =\ … though I’m so paranoid of not having enough that seems to counter-act the urge to overspend for the time being haha

      Reply
  • Ugh. My wife and I have this debate all the time. I’m constantly saying “we’re poor” and she comes in with the rebuttal of “no we are doing pretty well.” Truth be told, it’s somewhere in the middle, but that’s because we’ve managed to keep our expenses to a minimum, pay off debt, save, invest wisely, etc. All the regular boring stuff. To be honest, I don’t think I would feel like I made a lot of money until it hit close to a quarter mil per year, if it ever does. Of course, I’m rich in experience… but can’t pay a mortgage with experience.

    Reply
  • It took me a few years of making good money to feel like I made a lot, because I needed to have a decent stockpile in order to feel like I made a lot. I guess I care more about money in the bank than money earning. Now I feel like I do, but I would be so much happier being able to work 35 hours a week at half the pay. The amount of money I make isn’t worth the number of hours I’m expected to work.

    Reply

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