Get This Right and Riches Will Come

Andy Snyder|June 28, 2023

This might be the most important question you have to answer on your financial journey. It’s one we get asked a lot.

“How do I keep my lifestyle from getting more expensive as my income rises?”

Get this one question right, and riches will follow.

Get it wrong… and welcome to Mediocrityville, USA – population 300 million… and you.

This is a tough one. We work hard to make more. We deserve more when we get it, right?

It all depends on how rich you want to get.

If you don’t want to build wealth, spend everything you make. Do it as fast as possible, and buy things that depreciate quickly. Better yet, use debt to get what you want now… before you can afford it.

But if you actually want to build wealth, then you must spend less than you make.

There’s no other option. And the larger the gap is between what you make and what you spend, the wealthier you’ll become… and, yes, the sooner you’ll get there.

We grew up in the boating world. It’s the home of what we call “2-footitis.” It’s a financially disastrous disease.

When you own a 20-foot boat… you want a 22-foot boat. When you get the 22-footer, you lust for a 24-footer.

It never stops.

We had a friend who owned a 147-foot yacht. It wasn’t big enough for him. He wanted another stateroom and room for a bigger helicopter.

It’s human nature… the downside of a scarcity mindset that is hard-coded into our DNA.

That’s why overcoming it is so hard – and nearly impossible for many.

We’d love to tell you to simply spend less… to stare at your pile of money without imagining the fun in the sun, shopping trips to Paris or cruises down the coast it could buy.

It doesn’t work. Few folks have that sort of willpower. If the average person did, many more folks would reach the oh-so-coveted mark of financial independence.

Instead, we must rely on something more mechanical… something with some built-in fail-safes.

Do This

For the young, tax-advantaged accounts work well. Money put in them can’t be touched – without a penalty – until retirement age. For true savers, that penalty alone is often enough to keep the money where it belongs.

Budgeting, of course, is another powerful mechanism. You’ve likely heard of the “envelope method.” It’s where you plop your money for the month in various envelopes and refrain from moving cash from one envelope to the next.

Using this method, you can keep your outgo static regardless of your income. There’s no need to make your food envelope any larger just because you make an extra 10 grand. The only envelope that you should allow to grow is the one labeled “Savings.”

In a digital world, we can take this idea further. Instead of envelopes, we can open bank accounts dedicated to various purposes. And just to ensure a flare-up of 2-footitis doesn’t wreck things, we can open accounts at several banks. It makes spontaneous moves much tougher.

One account can be for our regular living expenses. One can be for intermediate savings. One can be for taxes and scheduled maintenance. One can be for emergencies. And another can be for long-term (perhaps even generational) savings.

Setting things up this way makes it much harder – physically and psychologically – to spend money we shouldn’t.

Find your way. Figure out what works for you.

No matter what… don’t keep all your money in one account (or one envelope). It’s dangerous, and it won’t work.

Overcoming our instinctual lust for more is the toughest – but most powerful – financial feat we can pull off.

Get this wrong… and you’ll never make it. You must spend less than you earn.

Get it right… and the power of time will treat you very, very well.