There are myriad websites and articles dedicated to trimming spending and saving more for retirement. But the harsh truth is that you probably aren’t going to do any of those things.
Parkinson’s second law states that expenditures rise to meet income. While meant to be satirical, this “law” plays out in reality. Otherwise we wouldn’t read about people in the 1% lamenting that they don’t make enough money.
Law professor Todd Henderson received vitriolic criticism when he wrote a blog post about barely getting by on a combined salary with his wife (a doctor) of over $250,000 per year. His goal was to spark discussion on taxing high earners and instead he was lambasted for a lifestyle that is unattainable for the average joe.
More recently, attorney Stefan Baugh quit his job as a partner at a law firm and started a private equity company so he could feel truly wealthy. Paying for a house, car, and child care only leaves him enough money to feel “regular middle-class.”
He drives a Jaguar. He wants a Ferrari.
Of course, most Americans make nowhere near that kind of money. Yet wherever we fall in income, we never seem to have enough.
The more money that you make, the more you feel entitled to a certain kind of lifestyle. You worked hard for it so you deserve it, right? You go out to eat more and at nicer places. You buy a bigger house in a nicer neighborhood. You buy a nicer car. You go on nicer vacations. Maybe you send your kids to private school. You buy more stuff. And suddenly your salary barely seems to cut it.
While you can follow handy dandy tips like eliminating Starbucks and canceling cable, it is not going to save you a significant amount of money. Austerity measures may work in the short term, but how long are they sustainable? How long are you willing to go without your favorite caramel latte? What about missing the latest episode of Game of Thrones?
Your big bucks are spent on housing, vehicles, food, clothing, and vacations. So the question is, are you willing to downsize? The answer is, probably not. And maybe you don’t need to save more.
Are you maximizing your 401k and IRA contributions? Are you saving for your children’s college educations? Do you have an emergency fund with six months of expenses? Are you spending less than what you take in? If you can answer yes to all of those questions and plan to work until retirement age, then you have a sustainable lifestyle and budget. You are living within your means. Enjoy your life.
But if you can’t answer yes to those questions, then you need to examine where your money is going.
Let’s start with the assumption you are not spending more than you take in. If you are racking up credit card debt, then you are most definitely living a lifestyle beyond your means. Stop it or face the consequences.
For everyone else:
Maybe you don’t make enough money to save more – or even save anything. You may already live as leanly as possible. You rent or own a very modest place. You buy your clothes at thrift stores or on clearance. You own your ten-year-old car outright. You rarely go out to eat and buy your produce on sale. You either don’t vacation or visit family so room and board are free. So don’t beat yourself up over not saving. You are already doing everything you can.
Or maybe you lead what is considered an average lifestyle. You shop at the mall. You go out to eat occasionally, but not at the most expensive restaurant in town. Your car is a few years old. You go on vacation, but stay at budget hotels. You don’t feel like you are being extravagant, but somehow the money for 401k, IRAs and college savings just isn’t there the way you want it to be. You save some, but you want to save more.
Skipping Starbucks and trimming back your “extras” will save a few hundred dollars here and there and maybe a few thousand per year if you can maintain the austerity measures indefinitely. To save a large amount, however, you need to make drastic changes to your life.
Are you willing to give up the car with the monthly payment and drive something you can afford to buy outright? Are you willing to give up owning the latest in electronics and name brand clothes? Are you willing to cancel that big ticket vacation? Are you willing to move to a smaller, less expensive dwelling? Do you then have the willpower to put all of that money into savings and college funds? Maybe. Maybe not.
Parkinson’s second law is likely a reality for you. And once you get comfortable with a certain lifestyle, it is really hard to downgrade unless you are forced into it by circumstances.
So that is why you won’t save more. Not that you shouldn’t try. But you probably won’t.