Different Levels of Poor
Clients in their 20s often believe that their financial situation will become easier once they are finished school and start making an income. Sometimes this is the case; however we’ve learned that more often than not, they just experience “different levels of poor.”
What do we mean by this? Allow us to use James as an example. James was in university and living on a fixed budget with an income of $30,000 per year. In order to live on that income, he chose basic Netflix, a pay-as-you-go phone plan, and drank the cheap beer. After graduation James started to make more money. He was now earning $80,000 a year as an Account Manager in Montreal. He subscribed to multiple streaming services, upgraded to the latest iPhone, bought a car, moved into a nicer apartment, and developed a taste for imported beer. Despite his increased income, at the end of the month he had very little left over. This is what we refer to as a “different level of poor.”
It is a myth that living within your means becomes easier once you start making more money. The reality is, the more you make, the more you spend. This is because typically once you make more money your standard of living increases. No matter how much you earn, you continue to struggle with financial constraints. Despite the growth of your income, you will always be faced with financial challenges, although they may present themselves in various forms.
What is important is to review your budget frequently, make decisions based on your current means, and set your financial goals accordingly, rather than putting off savings or going into debt.
If you need assistance with your budget and cash flow planning, contact your trusted advisor.