When your income increases, are your expenses rising, too?

I once heard the phrase, "Expenses rise to meet income." “Not me,” I thought. But to be honest, even an extremely frugal person like me lets expenses rise with income.

For most of my life (we’re talking quite a few decades), I watched broadcast television and library videos on hand-me-down TVs. Being a single parent, cable was not in the budget.

Letting Expenses Rise Unnecessarily

After my nest emptied and I had only myself to support, I started to envy friends and the great stuff they watched on internet streaming sites, so I started to pay for streaming. But because my TV was so old and dated, I had to move off the living room couch to a hard chair in front of my computer screen to watch shows and movies. I was okay with that, but my cat was not. We had a lot of disagreements about what was comfortable and what wasn’t.

So, I finally paid money for a new TV for the first time in my life. (I didn’t completely break the bank, though; it is a modest TV.) We were back on the couch for TV time, and harmony was restored to the household. But it meant I needed to buy other devices, like a digital antenna and a box to connect the internet to my TV. More expenses.

I could argue all this spending was justified to keep the cat happy, which makes my life easier. But the truth is, I didn’t need to pay for entertainment in the first place. There is still plenty to watch on broadcast TV; plus, my library is only two blocks away.

Reasons to Prevent Expenses from Rising to Meet Income

1. Retirement. I have a cousin who always put her pay raises into her retirement account instead of spending it. Because of her diligence, she retired early with her husband and they are enjoying life very much. Setting aside money now from pay raises, savings on expenses and tax refunds can assist in meeting any quality of life goals post-retirement.  
2. Unforeseen events. It doesn’t take much — like car repairs, medical bills and broken appliances — to put a family into a financial tailspin. Nearly 70% of Americans have less than $1,000 in savings. Almost a quarter don’t even have a savings account.  When your income rises, take that opportunity to put the additional monies into an emergency savings account. Money in the bank can bring greater peace of mind.
3. Reduced income. Keeping monthly expenses to a minimum will make it so much easier to weather a big drop in income – whether through a layoff, divorce or injury/disability. This is extremely beneficial when one is not tied to expensive phone contracts or a new car payment.

Be Cautious Before Taking on New Expenses

I’m not suggesting we always have to deny our wants. Before you get locked into a new expense, though, take time to consider both the pros and cons.

• Review your retirement and/or emergency savings. Are they sufficient?       
• Ask yourself how necessary the expense is. Can a cheaper car suffice? Does everyone in the family need a new phone? How many streaming or gaming services can you realistically use? 
• Remind yourself how marketing and advertising manipulates us into spending our hard-earned money on unnecessary stuff.

Save that new money! I guarantee you’ll thank yourself someday.

LSS Financial Counseling offers free counseling for budgeting, debt, credit, student loans and housing. Find us online at lssfinancialcounseling.org, or call us at 888.577.2227 for a free, confidential appointment.
 

Mary Ellen Kaluza is a Certified Financial Counselor with LSS Financial Counseling,