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Money problems

Welcome to reThinkable – my Sunday newsletter where I share actionable money tips, strategies, and resources to help you make smarter money moves.

Read time: 4.0 minutes

Hey {{ name | friend }},

Do you think more money will solve your financial problems?

OF COURSE, right? Well, one of the hardest pills to swallow when it comes to personal finance is this:

More money could make your financial problems WORSE.

It seems totally contradictory, but think about it for a second. If you have trouble controlling your spending now, how would that change if you earned 2x, 3x, 4x more?

Instead of feeling guilty because you bought another pair of $100 sneakers, you’d feel guilty because you bought another $10,000 watch. That’s why rich people go broke all the time—50 Cent, Mike Tyson, even Walt Disney filed for bankruptcy after earning millions.

So, how do you make sure mo’ money doesn’t equal mo’ problems? You have to watch out for lifestyle inflation.

Lifestyle inflation

Lifestyle inflation simply means that as your income goes up, so does your spending.

Every time you get a 5% raise, a juicy promotion, a big bonus, you start rewarding yourself just a little more. After all, your hard work is finally paying off, right?

You trade your $2,000 studio apartment for a $5,000 condo with floor-to-ceiling windows. Your 2015 Hyundai Sonata becomes a $50,000 Tesla. Your Planet Fitness membership has been replaced by a $500/month personal trainer.

Before you know it, you’re working harder than ever just to maintain the lifestyle you built with those raises. 

And you’re more stressed about money than when you made half as much.

Doesn’t really sound like what you signed up for.

How to avoid lifestyle inflation

I’m not saying you need to live exactly how you did when you earned less money.

You should enjoy the rewards of your hard work.

But the trick is doing it without letting your spending spiral out of control.

I like to follow “The Big 3” Rule.

Essentially, I choose 3 big things that matter the most to me. For those, and those only,  I can allow myself a reasonable upgrade if I’m earning more money.

I love this strategy because I’m spending my money on what will really make me happy.

Here are my big 3 right now:

1. Health: This means investing in things like a really good mattress, my Whoop band, and healthier foods (less processed food even though I love to dabble in Spicy Sweet Chili Doritos) . Basically, anything that helps me feel better, sleep better, or stay healthy longer.

2. Family: If I can afford to help my parents more, pitch in for a nice vacation, or fly out to visit extended family—I’ll absolutely do it. 

3.  New Experiences: I want to be that cool 90-year-old with the wildest stories. Skydiving? Road-tripping across the U.S.? Hot air balloon rides at sunrise? Sign me up.

When it comes to everything else, I pretend I’m earning the same as I did 5 years ago.

I drive my 10+ year old car, shop at thrift stores, and take advantage of every way to save money when shopping online.

Because I know that the BEST reward is freedom. And freedom comes from 1 thing: money in your savings and investment accounts.

3 things you can do TODAY

No matter how much you earn, saving is the key to your future. The money you save is the money you can invest and grow without lifting a finger. 

All you have to do is increase the gap between your income and your expenses.

Sounds easy in theory, but most people struggle because they don’t treat their personal finances like a business. Why? A business exists for 1 reason: profit.

Big successful companies have dedicated teams reviewing budgets, growing revenue, and cutting costs. Higher profits = happy shareholders.

Now think about your life. If your income keeps going up but you never look at your expenses… that’s a recipe for bankruptcy. And the main shareholder (you) won’t be happy for long.

You need to start your own one-person “budgeting department.” The good news is that you don’t have to read 5 accounting books to do it.

You just need a Money Map. Think of it as a quick and easy way to determine if your personal finances are headed for success… or drifting the other way.

This is you need to do today to future-proof your finances: 

1. Get my Money Map for free (PS there’s a free video tutorial on how to use it)

2. Determine your Money Map Score: Your Money Map Score tells you how you’re doing with your money. Great or Needs Improvement.

3. Cut 1 big monthly expense to boost your score: Don’t stress over your $7 coffee, instead try to reduce costs where it will actually matter.

  • Rent: If rent is eating up more than 30% of your income, it’s time to explore other options. That might mean getting a roommate, downsizing, or looking into sublets or rent-back units.

  • Bills: A lot of people stick with the same phone, internet, or cable provider for years just because switching feels like a hassle. But these companies kinda punish loyalty. I used to pay ~$144 per month for my phone plan but now I pay just $15 a month for unlimited data and unlimited minutes.

  • Car insurance. Car insurance rates have gone up by 30% in the last 2 years. Stop overpaying for this. Here’s a free tool to help you find out if you’re wasting hundreds every year on overpriced car insurance. See how much you could save.

Reply to this email when you fill out your Money Map. What’s your Money Map Score?

To making smarter money moves,

— Vincent Chan

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Vincent Chan

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