5 Money Mistakes High Earners Make
Career-wise, you've made it. You've worked hard for years, made sacrifices, improved yourself personally and professionally, contributed to your field and the world, and you're at a level you only dreamed of when you started out. Better yet, you have the paycheck to match.
So why do you still feel like you can't relax about your money?
Why are you still anxious about debt, spending, and saving enough…years after hitting the first milestones you set out for yourself?
Why are your finances still stressful?
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The answer to this question has two parts.
The first part is that money is a highly emotional subject, and our feelings about money are often informed MUCH more by our childhood experiences, previous stress or trauma, our conception of identity, and our expectations for the future than they are informed by the numbers in our bank accounts.
The second part is that there are classic practical mistakes a lot of high earners make, which perpetuate stress and keep you stuck in the same financial position you've been in for a while...since before you made it to this income level.
(Several of these mistakes aren't specific to high earners, but often become magnified at higher income levels.)
Here are a few I see a lot among my clients:
Opting into extra expenses without a plan
This one gets a LOT of press, often as "lifestyle creep". Lifestyle creep: every time your income increases, your spending increases - at the same rate, if not at a higher rate. It's good and normal to want to enjoy the rewards of a higher income, but we want to make sure you're truly spending on things you value in order to both enjoy your life and achieve your long-term goals.
It's easy (and very popular) to criticize people who make good money for spending on things that others might consider extravagant. This is one of those mistakes I see at every income level - it's just more of a problem when we have the money to stop it from happening, but never get around to it.
Often, choices we make can have a domino effect on our finances.
Here's an example. Say you want to take your family road tripping through the National Parks, so you find and buy a camper you love. Turns out, now you also need a truck to tow that camper. Now that you've got a truck (and TWO new vehicle payments), you've also got to spend more on gas every month and repairs every year...plus, your garage was getting tight BEFORE the truck, so now when you move you're gonna look for a bigger (and more expensive) garage. And...we've just "give your mouse a cookie"d ourselves straight into over a thousand extra dollars per month!
It's not that the camper was a bad idea on its own - but that domino effect of unplanned expenses sure can be.
If you want to maintain your current lifestyle and also retire someday, it's a great time to examine your money strategy. The good news is, with a high income and the right money system, you can live a very vibrant and comfortable life, while also doing what you need to to support yourself and your family in the future.
2. Letting anxiety and scarcity drive your money decisions
If you've ever experienced a flash of panic when pulling out your credit card to pay, or obsessively checked your bank account balances every day, or avoided looking at the bill for a large unexpected expense, this might be you.
This occurs when you grew up learning how to save, but not how to spend.
Spending is a SKILL that requires PRACTICE, and often times the ghost of advice we heard as kids sticks with us. So if you grew up hearing "if you start spending money on yourself, there's no stopping it," or "buying one extravagant thing is how all your self-control falls apart and you end up on the street with nothing", these beliefs can be hard to shake. (They were for me!) You might find yourself with considerable financial success, but feeling paralyzed and unable to enjoy it.
This also is directly tied to mistake #3...
3. Not having a vision for your money
This is the biggest mistake you can make either as a high earner or not, but it's especially painful when there's so much potential!
Do you have a vision for exactly how many vacations you're going to take this year, where you're going, who you'll be with, and how you're paying them off ahead of time?
Do you know how you're going to split out that big commission you're expecting at the end of the year?
Do you sleep easy at night knowing you're automatically paying your bills, paying off debt, and saving and investing comfortably for your future?
Do you know your financial independence number, and the month and year when you're going to reach it?
A vivid vision for your money, plus a seamless system to make it happen, answers all of these questions and more - and it is SO much fun to develop and live out. It helps you answer these questions proactively, avoiding the potential mistakes below:
Dreaming about those vacations for years, but never taking them because you feel like you can't afford them and don't know how to start saving
Taking those vacations, but spending 1.5x to 2x their initial cost because you paid for them via credit card without a plan to pay them off - and stressing about the debt for years after you get back home
Using that commission like a stopgap to solve financial problems...but ending up right back where you started a few months later.
4. Being stuck in the pattern of getting bailed out by windfalls
High earners often see money come in in large windfalls. Have you ever gotten a substantial annual bonus, an inheritance, a lump sum from the sale of property, or cashed out some stock options...and gone "this is it! we can finally make progress!"? These are a real boon and can truly put you in a great position. But what we want to watch out for is a pattern:
If you use a windfall to pay off significant debt, but end up right back where you started a few months later, you know what this feels like: out of control.
5. Missing out on HUGE wins
I've found that at the income level of about $150k, even couples who used to keep an eye on their spending don't do so anymore. That's because common budget spreadsheets need a lot of work to maintain, and that effort doesn't feel worth it when you're no longer scraping pennies together.
Unfortunately, this often leads right back to "I just don't understand where the money went!".
If it's been a while since you've made a plan for your money, I'm willing to bet you there are literally thousands per month you're missing out on.
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If you have a high income but not the net worth or peace of mind to match, or if you still find yourself saying the same things about money as you did when you made half of what you do now, it's time to get an expert pair of eyes on your financial system.
Click here to book a call, and set a date on your calendar to start changing your story around money.
- Coach Annie
