Is Your Spending in Line With Your Position on the Wealth Ladder?
The last time I went grocery shopping, I bought brand-name cheese instead of store cheese. The difference in price between a $ 2 cheddar and a $ 6 cheddar used to seem incredibly large; it doesn’t matter now. However, it still logs every time and reminds me how much my life has changed over the past ten years.
Nick Maggiulli, who writes about personal finance from a data analytics perspective for Of Dollars and Data , recently shared his thoughts on how to deal with such price differentials and how to leverage his understanding of how much money you should be spending on cheese. (either in restaurants, or on vacation) to save money and move up what he calls the “wealth ladder.”
First, Majulli explains, you need to know where you are right now. (Literally. On a figurative ladder.) It defines six different levels of spending ability, starting with the level at which every penny is counted, then the level at which every $ 10 is counted, then every $ 100, and so on.
If you are lucky enough to watch your income grow over time, you will know exactly what Majulli means here. Back in 2004, when I was a salesman in Minneapolis, I was on the “every penny counts” level. The pennies were so important to me that I calculated my bus rides, so I only had to pay for off-peak travel.
These days, as I pay off debt and make more money, I feel like my financial sensitivity is gradually approaching the “every $ 100 in account” level, although I continue to convince myself that every $ 10 matters too. I just booked a 90 minute massage instead of a 60 minute massage, for example, because it was only an extra $ 50 (including tip) and it felt like a fair raise. However, I still fly economy class – or even economy class if tickets are available – because paying a few hundred dollars for a little more comfort doesn’t feel right to me.
I mean, it doesn’t feel good yet.
As Majulli reminds us, our priorities tend to change as our net worth increases, and the best way to increase our net worth is to stay within the financial priorities that are in line with where we are now.
If you are at level 1 and book a vacation without worrying about expenses (level 4), you will not move further up the corporate ladder. Until you have money for frivolous spending at a level, you must strictly control your spending at this level. Do it right and you’ll have a much better chance of moving up the career ladder.
I booked a vacation “not caring about spending” before I was earning enough to spend that kind of money on vacation and I put most of the expenses on that trip on credit cards and paid them later and it was still one of the most bright events in my life. So the rules don’t always apply in every situation.
But it’s worth asking yourself where you currently stand on Majulli’s “wealth ladder” – can you afford to buy groceries without worrying about an extra $ 4 for cheese, for example, or can you afford to order a 90-minute massage instead of a 60-minute one – and how it might affect your spending priorities in the future.
Because if you climb the wealth ladder one rung at a time, you may have enough money to buy whatever cheese you want, or you may never have to sit in the underlying economy again, but if you don’t keep track of every penny. when every penny counts, you may never end up in a place where you think of money in terms of $ 10 or $ 100.