High Salaries Don’t Make You Rich

By Melissa Tosetti

A high salary does not equate wealth.

I pulled the line above from an article I came across titled: Why people who earn a lot of money still can’t pay the bills.

The author, Steve Adcock, frankly confesses his own struggle and 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 seen and helped clients resolve over the 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.

Adcock goes on to say;

  • 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 their wealth building accounts.  Not coincidentally, their quality of life actually increased as their spending became more purposeful.  That outcome is not an accident.

To get an idea of where you stand regarding income and wealth, calculate your net worth.  To do that, follow these steps:

  1. List your assets (what you own), estimate the value of each, and add up the total. Include items such as: home, cars, investments.
  2. List your liabilities (what you owe, including what you owe on those assets you just listed) and add up the outstanding balances.
  3. Subtract your liabilities from your assets to determine your personal net worth.

Based on where you are in the length of your career, this can be a wake up call.

A wake up call one of our recent clients experienced is that he had an annual salary of over a million dollars and yet rented a home and leased his car and boat. He was living paycheck to paycheck due to large credit card bills among other things.  While his salary showed a million dollar income, he was the opposite of wealthy.

The scenario above is even more common with people making six figure salaries.  Without a plan, we bounce around from one expense and spending scenario to the next never giving ourselves an opportunity to set money aside to build wealth.

The unfortunate side effect is that very often, people in these situations become trapped by their jobs.  They’ve created a lifestyle that needs a certain salary to feed it.  If they don’t like that job, they’re miserable and very often, spend even more to relieve stress.  It can then be catastrophic if something should happen to that job – even if they hate it – and they find it challenging to find a new one at that same income level.  This is a scenario we’ve seen over the last two decades in the tech industry.

The thing is, it’s about more than just building wealth.  Without a plan, our spending can be erratic as we make purchases and spend around the life we want rather than straight to the life we want.

If you’ve decided that you want to stop “living rich” and actually become rich, the first step is to get a clear understanding of where your money is going.  Of the items you’re spending on, which give you true enjoyment and satisfaction and which are purchased out of convenience, boredom or habit?  From this information, you can begin to define how you want to spend your money in the future.  By becoming more purposeful in that spending, you can more easily free money for your wealth building accounts without feeling deprived.  In fact, by becoming more purposeful, as mentioned above, your quality of life actually increases.

This approach is deceptively simple (like the dieting advice to “eat less and exercise more.”) However, I am the first to understand and appreciate that for many people, money can be incredibly complicated, tangled and emotional. Even identifying poor money habits can be difficult, let alone making the changes to effectively eliminate them. But, the payoff, whether you consider yourself a high earner or not truly is lifechanging.


Melissa Tosetti is the founder of The Savvy Life and author of the international bestseller Living The Savvy Life. For the past eight years, she’s worked with over 545 individuals and families to create Spending Plans. Melissa also works with financial advisors and their clients doing cash flow planning as well as giving over 200 Savvy Living presentations via webinar and in-person to audiences across the U.S.

If you’d like to learn more about how Melissa works with clients visit The Savvy Life’s Programs page.

If you’d like to learn more about how Melissa works with financial advisors and their clients visit: The Savvy Life Advisor’s Page