By Melissa Tosetti
As a financial advisor, this is a fact you’re likely very aware of.
I pulled the line above from an article I stumbled on over the holiday break titled: Why people who earn a lot of money still can’t pay the bills.
The author, Steve Adcock, goes on to say: In fact, high salaries are deceptive. They make us feel rich, but many of them come with an expectation that spending money earns money.
The article is flush with examples of the types of challenges we’ve helped clients resolve over the last seven years. Just some of the highlights include:
- Earning high salaries have a way of boxing us into a lifestyle that systematically drains us of the large majority of our wealth, often through debt. We believe that we’re rich, and therefore, we spend accordingly.
- We live in high cost of living areas in nice homes and drive expensive exotic import cars because our salaries — at least on paper, support that level of spending. We spend because we can.
- Unfortunately, my income was supporting my spending, but I wasn’t getting more wealthy. I was quickly becoming a member of the pseudo-affluent society that shows wealth, but don’t actually have wealth.
Adcock believes, and I agree, that the five primary causes of high-income debt are:
- Lifestyle Inflation
- Looking the Part
- The ‘I Deserve It’ Trap
- High-Income Optimism
- The High-Income Savings Potential
He concludes with the statement: Don’t believe that it’s suddenly easy to get rich simply due to a high income. The available potential is there, but unless we escape the draining culture of “spending = success”, nobody is getting rich. And, nobody is retiring early. And lastly, it’s all very preventable.
He’s absolutely right! It’s very preventable.
Over the years we’ve worked with Doctors, Attorney’s, CEOs, Real Estate Agents, Executives and Business Owners that completely turned their spending around as we showed them how to live within a sustainable Spending Plan while putting more money toward building wealth through their financial advisor.
How much of an impact would it make on your AUM if your high earning clients began funneling more money toward their wealth building accounts? How much more value can you give your clients by helping them learn to spend purposefully now while building their wealth along the way?