In almost any conversation about money matters, having a high income is a great advantage. It affords you options most other people don’t have. Too often though you can find yourself wondering where it all goes as you try and make ends meet.
You’ve had success and have earned your wealth. One of the great rewards of success and high income is the ability to spend your money as you see fit. It’s typical to see high income individuals grow their spending over time and enjoy a lifestyle that is commensurate with their income. That might mean moving to a more exclusive neighborhood, having a membership to an exclusive country club and sending the kids to private schools. Or your lifestyle may include a second home at the lake or a condo in beachfront location with a boat and private dock. You can recognize the high-income trap when you start thinking that these things are essential as opposed to the benefits of having a high income.
One sign that you may be falling into the high-income trap is when you stop paying attention to your budget. When you start thinking that your income will always cover your spending you will continue to spend and never build real wealth.
If you find that your monthly bills are becoming excessive even with your high income, it’s time to reassess. Look at the true value of the things you own. Do you really need to have a club membership if you only golf a few times each year? If you bought the lake house for family gatherings but your kids are grown and moved away do you still need it? Or, would selling it and investing the profits benefit you more.
The high-income trap is easy to fall into. The upside is that with a real evaluation you might find that you can trim your expenditures greatly and reinvest those savings to build your wealth.