Why Your Income NEVER seems to be Enough

I would hand out lists of 20 typical household expenses and I’d ask everyone to write in the amounts they thought a typical family would spend on each of the items on the list. Everyone would then calculate the annual cost of their listed expenses and hand them in.

At that point I would make the prediction that the difference between the highest annual cost and the lowest annual cost would be around $100,000.

Without fail the lowest figure would be down around $40,000 and the highest would be up around $140,000.

So, what was the point of the exercise and what did that prove?

I wanted people to realise that their reality may not be normal. You will spend on groceries what you are used to spending without considering if you are being extravagant or stingy. The first time you put those fancy chocolate ice creams into your trolley you may have thought it was a little treat for that week, but that then opened the door for it to become less of a treat next week and a normal regular purchase the week after. Over time you can increase your weekly spend a lot on items that become normalised, that you could go without if you wanted to change financial direction.

You may complain about the cost of electricity, insurance, car repayments, rent or mortgage payments, but to a large extent, your reality is what you have created. The amounts you spend on everything may be vastly different to other families, so stop and challenge the amounts you have been accepting as normal.

You may find you are able to afford that holiday or save a house deposit after all, if you’re prepared to change your reality around some of your expenses.

As a general rule, the amount we spend each week is directly proportionate to our income, but you can change that. Your cost of living does not have to be determined by how much you earn. If one family can live on $50k a year, then even allowing for extra tax and less government assistance, surely a family earning $100k a year could save at least half of that extra income per year, but it usually doesn’t happen! Why not? Because we automatically upwardly adjust our expectations of what we can have as our income goes up. It’s human nature!

The only way to change that is to make savings an automatic deduction from your income so you never see it in the first place! This is just another way of protecting yourself from yourself!

If you want something bad enough you will find a way to make the changes and to stop yourself from sabotaging your goals. Have a look at the information about our awesome Spending Planners to see how you can get help to do that.