The silent killer of our finances.

Don’t fall into society’s financial trap.

Good morning and happy Friday, my fellow finance fanatics!

I’m sorry for all the F’s — that’s a mouthful. Anyway, in case you missed my update, take a look at last week’s newsletter.

Without further ado, I’d like to share a quick allegory. 

My girlfriend and I were talking about a mutual friend who just started working as a corporate M&A lawyer. This friend will make more than $200,000 a year. When I revealed this to my girlfriend, she was initially stunned: 

“Doesn’t he live with five other people? Why doesn’t he get his own place?”

My girlfriend knows the power of saving and living within one’s means — she’s a bigger saver than I am — but her immediate reaction tells us a lot about how society has shaped our concept of money.

Don’t conform just because you can afford to

There’s this underlying influence that if we make money, we should spend it. We’re consumers after all — keep consuming! If you increase the size of your stomach, just eat more. 

However, a dollar more of earnings should not equal a dollar more of spending. That’s a surefire formula for lifestyle creep: the phenomenon when luxuries transform into necessities.

People start making more money, but they just become bigger spenders. They purchase fancy material items and luxurious, all-inclusive trips. They take out bigger mortgages and rack up more credit card debt. 

This transformation is what leads doctors, lawyers, and other high-earning professionals to remain financially dependent even when they bring home hefty paychecks. They still live financially unstable lifestyles. 

Lifestyle creep is the reason a teacher can ultimately save as much as (if not more than) a lawyer. Here’s an example for illustrative purposes:

A higher salary or additional sources of income can unlock a wider array of opportunities and lifestyle advancements — but those opportunities and advancements still come with price tags. 

The biggest personal finance challenge is figuring out an enjoyable and comfortable lifestyle, one that doesn’t need augmenting once more money enters the picture. Needless to say, it’s a challenge because life isn’t that simple. 

But discovering and sticking to a lifestyle — at least one with financial parameters — is the vital (and oft-forgotten) step between you and financial independence.

My lawyer-friend is doing it right: living well within his means by sharing an apartment with a bunch of roommates.

Even though he can afford to get his own place.

As a reminder, you can check out previous editions of the Bits newsletter here.

Stay sizzlin’,

Carter Kilmann