If you’ve landed on this page you might jump to the conclusion that, here it is, another adviser telling me to live on Ramen noodles for the next 20 years. It’s fair to make that jump as we hear it all too often, re-cycle your paper towel, get rid of your car, take the bus and stop eating meat. Yes, certain individuals could certainly benefit from these measures but it wasn’t how I came to build my wealth and neither should many of you.
I’ll come right out with it, I was making a six figure salary and that, among other things, allowed me to build my wealth. Can everyone with a six figure salary build this kind of wealth? With a few exceptions (those exceptions generally involve recurring medical expenses) I’d say yes. Does everyone making six figure salaries build this kind of wealth? Absolutely not, the opposite is often true.
Like most people making this kind of money, I started with much less, way less when I lived in the Netherlands and still way less when I came to the States. Over time I built up my salary but more importantly I also spent less.
I spent less yet, I currently live in a house on the water, I have a boat that is docked in my backyard and I’ve never in my life had Ramen noodles.
Every night when I feel like it (weather permitting) I step in my boat and enjoy a round around the lake. Every now and then friends come along and we enjoy a good evening of fishing on the lake. I’d say we’re living the good live.
There’s some things I don’t have. What I don’t have, is a house on the biggest and deepest and most visited lake in Wisconsin. What I don’t have is the biggest or newest house on lake that we do live on. What I also don’t have, is the most expensive boat on the water.
I bought the cheapest new boat available with a modest engine. Do I envy the “Rolls Royce” of a boat with 200HP four docks down? Yes, I do. Would I want to spend the money to buy it? No I don’t. I’m also pretty sure that pride for the 200HP was short lived by its owner when his neighbor bought a 300HP not too long after. Did I envy that 300HP? Hell yeah. Still wouldn’t want to pay for it though.
At the time we bought our house, I believe I was eligible for a mortgage upwards of $760,000. So yes, I could have bought one of the biggest houses on our lake. I could also have easily afforded an $80,000 Tritoon with 350HP (just to outdo ALL my neighbors) but it’s not what I needed.
I bought a $12,000 pontoon with 30HP, I then saved some more to upgrade to a 90HP 2 years later and it has served me very well for over 6 years now. It will probably serve me just fine for another 6 years. It takes me where I want to on the lake, I don’t have to worry about dropping a worm on the carpet when fishing and I don’t have to fork over the extra $200 every year to get it shrink wrapped.
Do we live in the lap of luxury in comparison to many others? Yes I think we do, but I like to think we take the luxury in moderation.
Next time you get a raise; don’t look at it as the possibility of getting a bigger car as you can now afford $300 more in monthly car payments. Look at is as a means to build a better future. Invest the money; make extra payments to your mortgage, put it in your child college savings plan. There are so many better things you can do with it. It’s what we did and it eventually allowed us to afford the moderate lap of luxury we live in now.
Don’t try to keep up with the Joneses. It serves no one, including the Joneses themselves.
Good luck reaching your financial goals.
Four months till my company provides me with a raise. Rather than increase my bacon subscription to the premium frequency I plan to increase my savings rate by contributing more to the retirement account. I will eat a BLT on the shore of Lake Tahoe and think of your luxury in moderation.
Excellent plan, love to come join you at that Tahoe shore then, and enjoy a BLT myself. Congrats on that raise.