My wife and I save for a trip around the world by avoid "lifestyle inflation" which is what I've heard this referred to in the past (possibly from the Millionaire Next Door[1]). Each time we received a raise, we would increase our trip savings.<p>The easiest way to describe it is that we lived paycheck to paycheck. Neither of us would be disciplined enough to follow a strict budget, but we can easily avoid spending the money if it isn't in our accounts. So, each month, we had money withdrawn for retirement, trip savings, 529, and house savings. We increased this amount until we were just scraping by with just enough money each month. This meant I could buy whatever I wanted, so long as we'd have enough money at the end of the month to "pay ourselves".<p>I'm fond of this method, though I haven't found many others using it. I think typically, if people are disciplined enough to save money, they're able to follow some kind of budget.<p>A word of warning: Be sure not to be TOO aggressive with this, we almost certainly were. We were living off less than 30% of our after tax income. Remember, you should enjoy yourself while you're making money now, not just save it all for the future.<p>[1]: <a href="http://www.amazon.com/Millionaire-Next-Door-Thomas-Stanley/dp/0671015206" rel="nofollow">http://www.amazon.com/Millionaire-Next-Door-Thomas-Stanley/d...</a><p>Edit: formatting, link
> Building something interesting requires a surplus of time and money. Salaried jobs provide neither.<p>Standard negatory bullshit. You should be able to achieve building something interesting, using someone elses time and money. If you can't, maybe you've got an attitude problem, not a job problem.
Ah yes, the trap of a higher income.<p>Probably better to take the higher paying job and don't raise your standard of living. Adopt an automatic 25%+ of your income goes directly from your paycheck into savings. For a two income family, one spouse's paycheck pays the bills, and the others goes to savings and doesn't get touched.
The inflation is better focused on the life, not the lifestyle. I don't put my paycheck in the bank account and have set money withdrawn for my investments. I put my paycheck in my investments and have set money withdrawn for my bank account. I fight hard to make money for my future, and I know that's exactly where it's going. I keep strict records of my work time, and set a time limit on my job, then build myself outside of work hours, investing time in developing myself. If I prioritize some nice things that I want to spend on, i need to be patient, or it comes out of something less important. I find that careless expenses can be more of a burden than a pleasure, so keeping spending equal helps me improve my lifestyle, rather than inflate it.
<i>Building something interesting requires a surplus of time and money. Salaried jobs provide neither.</i><p>What? A salaried job is literally a company converting some of its money into time. It may not be <i>your</i> surplus of time or surplus of money, but that doesn't mean you aren't building something interesting.
On solution to this problem is make sure your social circle is weighted with people who spend money in the quantity and manner you wish to spend it.<p>I don't think I would ever naturally consider a luxury sedan a necessity, but if all my friends had them, I would begin to suffer from lifestyle scope creep.<p>My wife and I surround ourselves with people who do not spend large amounts of money in traditional ways. We don't budget, but according to mint, we live on just over half of our income.
>Building something interesting requires a surplus of time and money. Salaried jobs provide neither. Unless the job itself is your dream, stay the fuck away from them.<p>Yes, it's advisable to just start off with time and money.
<i>>Strong people fall for this trap. It’s poisonous.</i><p>"Trap" is the keyword here, in that it's set up by someone other than yourself. Your colleagues (esp those more senior to you) in these industries will purposely coerce you towards a higher maintenance lifestyle so that you will have an increasingly difficult time escaping.
I've observed this time and time again in my friends. One of my buddies and his wife graduated from a top-10 MBA program. His wife recently needed to get a new car and she wanted a Honda Civic which is a car that's got a decent balance between price and utility. He convinced her to get a luxury sedan because being seen in the company parking lot with that is a big no-no.<p>Another friend increases spending in proportion to income as well. Bigger house, new car, fancy toys. Babies get spoiled with way more than we grew up on.<p>It's a sad phenomenon. This is "Keeping up with the Joneses" disease. If instead of spending all your money keeping up you become disciplined with your spending you can retire early. And these people certainly don't love their jobs. How could you pass that up?
I quit my well-paid, normal, boring job two weeks ago because I realized I fell into this kind of trap. It's been just two weeks and I already cut my spendings in half - no more expensive stuff when cheap would suffice, no more electronic toys which have zero ROI, no more spending just to make myself feel better. No more buying <i>stuff</i> because I'll be traveling a lot soon and just won't be able to take it all with me. I actually ended up putting lots of stuff on eBay because I realized I won't need it anymore.<p>When you get a paycheck every month, there is <i>zero</i> motivation to save. When you know there'll be <i>no</i> paycheck, you finally get your brain going and you start inventing ways to make money instead of slaving away.
I might be crazy, but because of this I never negotiate salary. When it gets to that part of the job offer, I just tell them what I'm currently making and leave it to them to decide a reasonable increase. As long as they actually go up, I always accept.
I'm going to relay the depressing news that's behind this dynamic. Many Americans think of business as a risky, exclusive endeavor because "it takes money to make money". What's missed in that is that holding a job <i>also costs money</i>. Lots of it, although the costs are sometimes indirect. You have to live in an expensive location, although you're not getting <i>nearly</i> enough utility (in most cases) to justify paying to live there... except for the better jobs there. If you're serious about your career, you can't do your own cleaning: two-career couple and you need a maid. If you have kids, your bosses will ask where they go to school and it will affect your promotion chances. If a professional job pays $400k, there's absolutely no way you can keep it with less than about a $300k (pre-tax) lifestyle, and that's if you're really good. (The untalented need $500k to keep that job.) In fact, the major reason why it pays so much is because that is the economic cost of doing what the job requires (living in an expensive area, hiring a maid so you aren't distracted by chores). The vast majority of Americans' expenditures (aside from basic necessities) is put toward (a) recovering from negative emotional effects of work stress, and (b) meeting the social expectations necessary in order to succeed in one's career.<p>What we'd expect based on our knowledge of markets is that people would have to spend $1/year to keep a $1/year job. However, some people have a talent for managing money and saving. If they make twice as much, they save twice as fast. Instead of making $100k (post-tax) and spending $80k, they're spending $160k to keep a $200k (post-tax) job. The more they make, the more they save. No surprises.<p>However, the financially untalented are the ones who have to spend $120k to keep a $100k job. If they get promoted, they'll be spending $240k to keep a $200k job. They'll burn twice as fast.<p>This is a deeper problem than people think. It's not just about "discipline" or will. There are people out there who are just severely below average in financial sense and, while they can play the social gymnastics necessary to get the $500k+ jobs, they can't make $1.00 without spending $1.10 (at any income level).