In an article titled: The basics, some extras, savings: You need $150,000 per year, USA Today states that there are “Three groups [that] are experiencing higher rates of financial struggle: those with incomes between $100,000 and $150,000, those aged 18 to 34 years old, and women.” This article puzzles me. The average household income in the United States is $49,445 according to another article in USA Today. So where is the extra $100,000 going as “basics”?
How do you know you need it?
In today’s world, marketeers have trained us that we need or deserve a certain standard of living. Everyone needs a cell phone, even a 10-year-old! Everyone needs cable television. Everyone needs a car, with a car loan attached. Unfortunately, just because you can “afford” the payments, does not mean that you should be buying the item. The most heavily marketed to group, 19-34 year olds, are dealing with the peer pressure of keeping up with the Joneses by being persuaded they need the newest and best toy or gadget.
Where is your income going?
I am certainly not saying that everyone should make $50,000/year and be happy with what they have. I am saying that those who make substantially more than the average need to take a hard look at their basics and think about where their money is going. If you can live on less than you make and eliminate your debt, you should have plenty of money at an income level of $100,000 – $150,000 per year. In fact you should be working your way towards becoming wealthy, not signing up for payments to every store you go into.
Create a cash flow plan and stick to it!
If you are having trouble balancing your income with your expenditures, go back to the basics. Food (not restaurants), utilities (not premium cable), transportation (something that is paid for), affordable housing and basic clothing. Consider going to a cash system, rather than credit or debit. Spending cash will register in your brain far more than swiping a card will. You consider each item with more care before you purchase it.
Savings is the key to wealth building
The key to getting pointed in the right direction to a healthy financial future is to pay attention to where your money is going and constantly ask yourselves if a given purchase is the best use of your wealth-building resources. Remember the only person who will save for your future is you.
Tim and Kathryn Gerken are Financial Coaches in Newcastle, WA. They serve their community through, workshops, seminars and individual financial coaching. Please contact us for more information.
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