It is an interesting fact that as your income grows, spending typically increases as well. Often, as your income increases, you spend more money without even noticing it—it’s another kind of inflation that adds up to lost saving opportunities.
When the Jones’ come home with that brand new car, it’s easy to get the urge to go out and buy a newer, nicer car yourself.
That urge to keep up with the Jones’ can easily snowball out of control; buying more, bigger, and “better stuff.” A study published in Science Daily found that money makes us happy when it improves our social standing with our peers.
Maybe the Smith’s next door just remodeled their kitchen, and you decide it’s time to update your home too. Is this something that makes financial sense?
If you consider spending $50,000 for “better stuff”, instead, take a look at how saving, rather than spending, that money could affect your long-term savings picture.
In 20 years, that $50,000 could more than triple to over $160,000, if invested at a hypothetical 6%.