Now that I’ve installed snow tires, my car has only four things wrong with it. The passenger-side lock is misbehaving since someone tried to screwdriver it open this summer. The throttle sticks for a moment when the automatic transmission shifts to second gear. The heat takes twenty minutes to come on, and the suspension is creaking now.
I don’t know how much each will cost, but I figure if I’m lucky I can fix one item with each of my next four paychecks, if I tighten in other areas.
This is a pretty normal financial position for me. My life, the way I live it, is affordable, except when unpredictable expenses overlap. Just a little bit more income, say 10% more, would theoretically stop this from happening. But I’ve been thinking that for years, and my income is nearly double what it was seven years ago.
Parkinson’s Law is mostly responsible for this. We have an almost automatic tendency to increase our standard of living the moment our income increases. If you’re like most people, when your pay increases by another $500 a month, the first thing you decide is what additional $500-per-month thing you can now afford to enjoy, which is the same as deciding what additional $500-per-month expense you now wish to take on.
Every time that happens, your financial situation doesn’t really change, even as you climb through tax brackets. Ephemeral details of your life — what you are wearing, where you are eating, the sleekness of your furniture — do change, but the feeling of your financial situation doesn’t, and it is this feeling that determines whether your financial situation feels stretched, or ample.
That ample feeling comes, al least partly, from space. Ideally there would be space between what you earn and the cost of your lifestyle. If you have space, the thought of an unexpected expense doesn’t have the power to worry you, because normal life (for you) costs less than you have to spend on it, and so incidentals don’t put you in the red. On most of the occasions where life costs more than you expect, it still costs less than you have.
Space is an interesting asset in that it doesn’t actually cost money. It only requires that you leave a portion unspent. The returns on this zero-net-cost investment are considerable. It can make the difference between carrying a daily feeling of abundance and carrying a daily feeling of not-enough.
I’m convinced that a single middle-classer who makes $45,000 a year, and whose lifestyle costs $40,000 a year, is necessarily going to feel more day-to-day abundance than an upper-middle-classer who makes $100,000 and whose lifestyle costs every bit of that.
Even though I make a fair amount now (“fair” really meaning nothing; it’s actually quite unfair, given the global average income), even though I stay mostly debt free, even though I have no children, I do not have enough space. My lifestyle has come to cost about what I make, and that means it costs way too much.
There’s a stark difference in quality of life between walking around with a feeling of abundance, and walking around with a feeling of scarcity. As long as your basics are covered — food and shelter — either can be felt at virtually any income.
From the way people talk in my culture, I suspect most of us feel scarcity most of the time, regardless of our respective incomes. Parkinson’s Law silently inflates our expenditures to match our incomes, and so we’re always prone to feeling the pressure that builds when the two sums get too close. Expenses waver with happenstance, while salaries usually don’t. So at any given time, something can happen and expenses can balloon past your income. Living with that threat feels bad.
I’ve written about this before. If you’re middle class in a developed country, you are probably in the proverbial (and commonly demonized) “1%” in terms of income, if you take the whole world into account. So in terms of how much you have materially, almost everyone reading this is affluent. Yet I suspect most of us feel like we don’t quite have enough, most of the time. Affluence is a feeling, and having money and things does not necessarily reward you with that feeling.
If you don’t feel like you have enough income to be happy, ask yourself this non-rhetorical question: How much more do I think I need? Would another 10k per year do it? I know I’m guilty of thinking it would, and I’ve thought that even when I made 25k less than I do now.
So clearly my problem is not how much comes in but how much I believe must go out in order to meet my arbitrary, haphazard standard of living. By deciding consciously on a less costly lifestyle I could effectively give myself the substantial raise I often feel like I need, and probably become a healthier and less needy person at the same time.
My focus in 2013 is to redesign my lifestyle so that I experience affluence within my means. In other words, I will create a lifestyle where the essentials are taken care of first and fully, and which altogether costs significantly less than I earn. No more pushing at the edge of my means just because there appears to be space to do so.
Materially, most of us need far less than we imagine, if we examine our habits and give up dependencies on costly entertainment, mainstream education, commuting or other unnecessary norms. Here’s a wonderful essay by blogger Ran Prieur on how he has lived on as little as $2000 a year, and why.
The idea inspires me, but I think at least for this year I’ll aim for something in between that lifestyle and my current one. Since I got home from overseas I’ve let the cost of my life balloon to 20 or 25 times (!) that amount. So if I’m going to continue to earn that much, I am going to assume a moral obligation to find a way to make sure I feel pretty damn rich, every day. Not only is more money unnecessary for living with a feeling of wealth, but it is inadequate.
Parkinson’s Law is one reason we can feel scarcity at any income level, but I think the main reason is cultural. In North America at least, it’s normal to believe you’re always on your way to being rich, and therefore there’s no urgent need to find a way to be happy with what you have, because it will be easy to do it later when you have more.
This is the American Dream. It creates a cultural consciousness where we take for granted that later is generally better than now. Later is fertile for happiness, now is not quite adequate. Because we feel like later is when we’re going to have our ducks in a row, we more easily overlook foolish habits that we have now, like spending on indulgences when we’re not even saving for retirement.
How much does your life cost right now? Figure out the actual number. Why does it cost that much? Maybe you can get a much better deal. Not only that, but if your earnings do put you in the evil 1% — that is, if your take-home is more than 34k USD per year — perhaps you have a moral obligation to at least feel like it.
Earlier this year, Steve Pavlina posed a question that made me uneasy:
Is it possible for you to still enjoy your life even if your financial situation stays the same or even gets worse for the rest of your life?
What a terrific question. He was talking about a time when he was six figures in debt, which was a period when he learned to be happy regardless of what he had materially. My situation is much better than that on paper, yet I still usually feel like I’m living in a temporarily compromised position — in a few years I’ll be in a place where I can finally feel like I’m lacking nothing.
I wonder how many of you feel like that too. Why isn’t now the time to be thrilled with what you have, if there is ever going to be such a time? If you don’t make enough yet, where is the income mark you need to reach? I don’t know you and I don’t know your situation, but I know I passed mine a long time ago, and I am no special case.
Have a Merry Christmas. May you be rich, and know it.