Like many tweens and teens, I was addicted to Carmex. If you don’t know, it was a potent lip balm that bulged from the pockets of teenagers and dry-lipped people throughout the 90’s. Urban legend had it that once you started using it, you became addicted. I think this was probably true. A young Peter Dunn would slam his grubby ginger finger into a metal tub of balm, and then slap it upon his pale-ass lips. Even when I didn’t have dry lips, I would instinctively lube my kisser. In retrospect, it was pretty freaking weird. My actions became involuntary. My lips were as soft and supple as a baby’s armpit, yet I kept slathering up my face hole.
Habits can be so dumb.
One of the strangest personal finance habits that I come upon frequently is the absorption of a raise. Allow me to paint the picture. You’re living your life, making things work, and then pay-review time comes. What happens? Well, naturally you want a raise. Why? Beyond the feeling that you earned it, why do you want a raise? To get more stuff? To save more money? To pay down debt? If you get a raise, and you aren’t purposeful with it, then I think you create a major long-term financial problem.
If you have gotten to a financial happy place at any point in your adult life, please take yourself back there mentally. Things were nice, right? This time might be occurring right now. Does or did the situation need to get better? Isn’t better, just expanding your obligations and lifestyle? At some point, you’ve got to stop doing that. You’ll run out of crap to upgrade. Your house, your kitchen, your car, your clothes, your watch, whatevs.
I catch some crap over my curriculum only being for people who are struggling with debt and budgeting. That’s laughable, actually. I’ve never shared this, but I ghost-write material for one of the largest financial planning companies in the world. They often beef with me saying that upper-middle class people don’t have personal finance problems. They have no idea how wrong they are. The problem we’re discussing today IS the primary problem that affects upper-middle class earners. People create a dependency on their incomes, every time they absorb their pay increases. Even the smartest person will struggle to cut his spending, cold-turkey, as retirement approaches. The more people absorb their raises, the more they will spend, and the harder it will become to retire.
I’ve said it before, and clearly I’m saying it again: accumulation is a weird side-effect of saving money. The smart reason to save money is so you can prove to yourself that you don’t need to constantly expand your lifestyle.
I guess I should probably tell you how to save your raise. If you haven’t maxed out your company sponsored retirement plan, then this the best place to start. When your boss calls you into his office for a pay-review and a shoulder rub, listen for the pay increase percentage. A 5% raise? Awesome. Increase your 401k contribution percentage to reflect the entire raise. When the conversation occurs next year, do the same damn thing. But inflation and cost of living and shhhhhhhhhhh. It’ll be okay. All of those things take care of themselves when you pay off your car, your student loans, your credit cards, and when you keep an eye on your budget.
But milk used to cost $.67 per gallon! Shut your lips. They’re a dry mess.