That one day a year you have been dreading/anticipating at work finally comes.
Your boss calls you into their office and shows you a piece of paper that tells you your new salary. Yay, it’s more! Maybe it’s just a raise or maybe it’s a promotion, either way the new salary figure looks better than what you had. “Now I can get ahead of my bills and save a bit” you tell yourself. A few months pass and you look at your bank account. “Huh? It didn’t grow? What happened? I thought I was making more” you ask yourself.I’ve been there. It would happen to me a lot. I would make more but have nothing to show for it.
Know why? Upgrades.
I discovered that I would upgrade little things in my life that would eat away at any raises I got. Of course I didn’t realize this until much later.
Here are some of the bigger culprits:
Coffee – There was a time I didn’t drink coffee. Didn’t like it. Slowly I came to love the brown nectar. Instead of making it at home I would simply go to Dunkin Donuts. As well as regular coffee I would get all sorts of specialty drinks there as well like iced coffee, iced lattes – you name it. Later as I had more money I upgraded to Starbucks. Love their frappaccinos! But Starbucks is more expensive than Dunkin Donuts. Nowadays I still go to Starbucks as a treat but I’ll usually make my coffee at home or at work.
Clothes – There was a time I would shop at Old Navy. I’d get a pair of khaki’s or a polo for work or maybe some personal gear. Maybe I would get stuff on sale at the Gap. As I made more I’d shop at the Gap and get stuff on sale at Banana Republic. My income grew and I would shop at Banana Republic or Macy’s or Bloomingdale’s, not always looking for the stuff on sale. Now I try to stay frugal and shop at discount places like Century 21 or maybe Target. I also don’t buy anything unless I need to (like if a pair of pants blew out a hole that couldn’t be fixed).
Food – I remember a time where if I went out and ate sushi I would be broke. I might have been able to budget for it once a month but that would be it for going out to a restaurant to eat. As I made more money I would find myself eating out more and more. Sushi night didn’t hurt as bad and became more frequent (as well as other foods). I’ve since cut back a lot. We go out to eat from time to time but the majority of our meals are home based (except my work lunches but even those I’ve been getting cheap).
Gadgets/Doodads/CD’s – I used to buy so much junk that would clutter my apartment! I don’t think I have much left to show for it though. I do have hundreds of CD’s (no, not the investment type). Those aren’t a total waste but many I bought just to get something new or try a new artist. A lot of them don’t get listened to any more (and not just because of my iPod either). And you know how I’d pay for a lot of the stuff? Credit cards. So in the end I probably paid more than what the price stated. I’ve cut back on my impulses a lot and when I don’t I have my wife to answer to (luv u hon). As for music, I’ll still buy CD’s but very rarely and only from artists I’m really looking forward to (if only more artists would release their music like Radiohead for free).
So you see, I think a lot of the time when we get a raise instead of upgrading our finances we tend to upgrade our stuff or our lifestyle. As a result we upgrade ourselves out of our raise.
Have you upgraded yourself out of a raise?
I’m trying really hard not to upgrade out of my raise! I got my first “real” job last year and got my first raise this year. Right now I’m putting it into savings… but I think it’s still disappearing… I think I’m going to instead raise my contribution to my 401K… so that I really can’t get at it.
I minimised that problem by trying to always treat any pay rise as an increase in my savings plan. Over time you still tend to increase you living standard and expenses, but by automatically diverting pay rises into savings you tend to be more deliberate about any increases in spending.
I received a 15% raise…and I decided to live alone. My rent went from $385 to $670….which ate up all of my raise after taxes and retirement contributions. Even though I wish my rent was less, I wouldn’t change anything. Living alone is a powerful thing…I love it! I really feel like I’m in control of my life as an adult, rather than living a stunted adolescence.
Glen Craig says
@ JB – 401(k) is a great way to save for retirement. One point on savings – where are your savings? If they are attached to your checking account you may be taking small amounts out that are adding up over time. An online, high-yield savings account might help to “hide” the money so you don’t spend it. Just a thought.
@ Joe – Thanks so much for the link. I went over there and checked it out. Nice blog. The trackback did hit. I guess it just took a bit.
@ EnoughWealth – That’s a great plan. I know in my past I would look at a raise as an opportunity to increase my standard of living rather than increase my savings.
@ Saving Diva – Freedom costs. As long as you can live alone without incurring bad debt then you should be ok. As you get more raises you can put more away. Just try not to into debt. I think the responsibilities you learn being on your own are important. When I moved out I lived it up a bit too much and had to move back with my folks when I lost an apt. I was able to get rid of my CC debt though.
Grumpy Misanthrope says
if only more artists would release their music like Radiohead for free
But Radiohead didn’t release their album for free. They said, “Pay what you think it is worth.” Now, if you don’t think it’s worth supporting the artist by paying for the music, why do you even listen to them?
Nice post. It’s all about spending your money consciously, isn’t it? Paying attention to how and what you’re buying and if it is really where you want to put your money today.
Saving Diva made a choice that she was willing to pay more to live alone. I think that’s what money is for: deciding how you want your life to be and then paying for it.
Glen Craig says
@ Emily – Nice way to word it. Staying conscious of spending is very important!