Step 31: Understand you will never have enough money

No matter at what stage in your life you are, you probably feel that you don’t have enough money to live the lifestyle you truly aspire, let alone to behave (even more) sensibly with your money. When planning out, or even just thinking about, putting money aside to save, invest or pay off a debt, it is tempting to justify holding off making that sacrifice until you…. (insert excuse here).

Until you earn more? Until you’ve finished your post-grad course? Until you are married? Until you have bought a house?  Until your children are independent? You can come up with a billion reasons here, many of them probably valid in their own way, so let’s look at some of the most common excuses, so you can appreciate that with every change in your life, your spending patterns will most likely also change.

There are two main reasons why this thinking pattern of “I will start saving when…” never really works:

1. Changed demands

With every change in life, there are new needs and demands that need to be met. Think about having children, buying a house or getting older and needing medical care: Every stage is normally more expensive than the previous one.

2. Lifestyle inflation

Most people, when they earn more, start spending more. We want more and more from life every time and what was once acceptable as part of our lifestyle, changes as soon as we can afford more. Where we are happy to earn $1200 a month at first and manage to only spend that amount, when we earn $1500, we can’t imagine spending any less than $1500. When we double our income, we double our expenses. This means we are never able to catch up on our debt or savings goals as expenses increase linearly with income.

Let’s look at how both these factors affect your spending and savings at different stages of life.

Your twenties

When you’re in your twenties and you have just finished your education, do you think you have money spare to set aside and invest in your future? Probably not, you’re still at the base of the employment ladder and so is your income, so you can’t imagine taking money out of your wage to save or pay down debt, you’ve got loads of time for that ahead of you. Now that you are no longer in college lifestyle inflation also kicks in: where it was once acceptable to share a flat with friends, now that you are making more money this suddenly seems unacceptable, so you go and find your own place. Low budget holidays seem so not right anymore now, as since you are working you surely deserve more luxury and you are happy to pay a little more for it. Changed demands (your professional job) require you to buy a car, so you can only do one thing which is to take out a loan for that.

Your thirties

Maybe when you are in your thirties and earn some more you can start saving? Not so fast, as you might want to have children and you are well aware that babies are expensive, and you’ve also started paying off your student loan a few years ago and will be doing so for quite a while longer. That promotion that you got means that you have to look much more representative and so the increased wage you are spending on high fashion suits and statement items. You’ve bought a house with your partner so apart from the monthly mortgage you also like to buy new furniture every now and again to decorate the place.

Your forties

In your forties, things will have calmed down, you’ll be earning even more due to promotions, so for sure that’s when you start saving aggressively. Good idea, but now your children are a little older, take up more space and since the first will soon be going to secondary school, you are moving to a bigger house so that everybody has more space to study, live and play. An increase in the mortgage payment for sure and with the recent problems in the housing market there’s a time when you’re even paying two mortgages as you aren’t able to sell your other house as quickly as you thought. Education of your children is expensive as a lot of people around you have their children in a private school, and you want to give your children the same chances as the other children. (To be honest you never thought you’d send them to private education, but since everybody else is doing so, you probably should too). Then there’s the family holidays, a second car you need and the latest gadgets to keep up with to go with your lifestyle.

Your fifties

Maybe when you are in your fifties then? (I hope you’ve realized by now that compounding interest has only ever worked in your disadvantage in this way, adding more and more to your debt balances not paid off faster and not giving you any advantage of savings being built up by interest compounded over many years…). In your fifties there are your parents who might need extra help, both your children are now at university and living further away and apart from that being expensive as you insist in paying at least part of their college fees, you also know you need to make more time to see your family. So you start working fewer hours to have time to visit both your parents and your children regularly. Apart from earning less, this also adds extra costs. But instead of scaling down your expenses, you see other people around you in their fifties and sixties taking early retirement and traveling as often as they can, splurging on hobbies such as golf or other expensive activities and you feel that you too deserve this so you keep spending more and more instead of less.

Your sixties and beyond

As you can see, there are always many reasons why you can’t save (more) money, but the truth is, this will always be the case. What happens in your sixties and seventies is that instead of having a financial cushion, you are drawing up more and more debt. When you get older you likely need more medical care, your income will go down or disappear all together when you stop working, and although you might get a pension, this is likely a lot less than what you’re used to, regardless of whether you were used to $1.000 or $10.000 a month, it won’t be enough. You might end up working until you are a lot older than you hoped and older than other people around you (who did start saving early!) and you therefore have no money let alone time to visit your children and your grandchildren..

Whether you are in your twenties, fifties or seventies, you’ve always got other things to spend your money on. The above are just a few examples, whether you have children or not, a mortgage that is too high, an expensive hobby, or you like splurging on travels, cigarettes, new clothes, gadgets, you name it.. There are always many reasons why you can’t save.

Step 31 – Understand you will never have enough money – in detail:

• grab a pen and paper or your digital file and write down your different time periods in your life. They don’t have to correspond to the decades as above. In my case this would be:
  • 18-23 University
  • 23-27 emigrated to Spain, first job, bought a house
  • 28-now set up my own company
  • etc.
• Start with when you finished school all the way up to today.
• Now for each of these periods, identify excuses you could have or have used to not invest in your future.
• Continue and identify why you aren’t saving anything just yet at the moment and continue doing this working up to when you are say 70 or 80. Think of possible excuses you could use in your future.

I hope this has made you aware how hard decisions you make now can make a tremendous difference later on, and how difficult it will always be to make those decisions. Hopefully the previous steps already made you totally motivated to start saving or paying down debt and this just served as a reminder to keep it up and to always look for even more ways of investing in your future. If not, I hope this has now given you enough reason to finally start. So if you haven’t yet, return to the steps that talk about saving and paying down debt before you continue. Here’s to a good financial future!

Read more about my 100 steps mission to financial independence or simply decide to take control today and join us on our step-by-step quest on how to make your finances work for you, starting with step 1.