Well, they’re $190 as of this posting. Still – I almost did it. What makes this so funny is that I don’t even spend that much on my regular shoes. I don’t. Not to say that I won’t — I’m just saying that it would be abnormal behavior for me. Friends… Today, I want to talk to you a second about money… And house shoes.
DISCLAIMER: I AM NOT A FINANCIAL ADVISOR
So… (Lifestyle Creep & Impulsive Spending)
I don’t know where this got ingrained in my mind at some point – but I am TERRIFIED of lifestyle creep. I try to watch out for it where I can unless I’m making blatant decisions to drop some coin (which I do often enough – trust me).
What is lifestyle creep?
In my mind, it’s the collective little expenses that kill you financially because “you can afford them now” and “it’s ok to treat yourself every now and then.”
I don’t argue with those things at all, but I’m convinced that this aversion I have is a symptom of growing up in a household with a small number of resources. We didn’t have too much, but we had tons of joy. It was that kind of childhood home. And my parents made sure that we (me and my brothers) “had”. We were never hurting for anything, but we also understood that we couldn’t have EVERYTHING — and we accepted that.
Fast forward to now, and sprinkle in some personal finance courses along the way, and what you end up with is a person who isn’t cheap – but someone who damn well watches out for things like impulsive spending (literally making unplanned purchases on a whim) and lifestyle creep.
These $200 house shoes were the perfect example of both of those things for me.
$200 Won’t Hurt… (Opportunity Costs)
Here is the thing, I have nothing against these shoes. In fact, I still want them. But I talked myself out of buying them for 2 reasons:
I was attracted to them because of the great review I’ve heard and their soles. The soles are basically like real shoes — but these are for in-home use. But… if I don’t really WANT to walk around dirty downtown San Diego streets and bring that into my home, then what’s the point of being fascinated about a real shoe-like sole?
I couldn’t figure out how these $200 house shoes would change my life. I know that sounds silly – but, hear me out. If I spend $200 on a pair of boots or regular shoes – I’m not expecting anything life changing. That is all for style. BUT… If I drop $200 on some shoes that no one will ever see me in unless they visit my home… Why am I doing it? It better be because the comfort of said house shoes is $200-worth of life changing foot comfort. And I just couldn’t bring myself to see that value in these.
So… I stopped myself… for now (haha – they do have sales on the site for these shoes).
Still, that’s not the point.
The big thing in the back of my mind is that life has proven to me time and time again that if I splurge on an impulse purchase like this just because my means allow me the freedom to do so — WITHOUT FAIL — something else I genuinely NEED (and not just “want”) will come up that costs the exact amount that I just spent on a relatively “small” unexpected buy.
I have grown old and wise enough to understand opportunity costs (what thing I’m potentially giving up by using my resources on one option vs. another), so I literally think in terms of, “What else could I do with that money?,” immediately when I run into instances like this.
About a week later, that’s exactly what happened. Something else came up that cost right around $200 that I actually needed to cover. So I did. A small bit of unrelated self-control actually helped me out down the line.
$100K ≠ $100K (Disposable vs. Discretionary)
Look, I don’t knock anyone who has these shoes. In fact – as I said – I still want them. But, as a single-income household, whether I can afford it or not, I need to try to be a tad bit smart with my money so that I’m not setting myself up for failure down the line.
The danger of things like lifestyle creep (especially when presented in the form of impulse purchases that you can afford) is that it is very true to its name. It creeps up on you unexpectedly and then BOOM! You suddenly find that your 6-figure salary really doesn’t stretch as far as you thought it could.
And why is that? Yes, the costs of things rise. I think I saw it reported somewhere recently that the U.S. is currently experiencing a 7% inflation rate. But if you’re living below your means vs. trying to spend every penny you make — you’ll weather that storm a little bit better than others with your same income, but more lavish lifestyles.
When you don’t have much, $75K a year can seem like a lot. And then you get there and you find out that $75K doesn’t really cut it, and what you REALLY need/want is $100K a year. Ok, so you get there and that’s STILL not enough. Now you’re gunning for $125K a year. And then $160K a year.
The numbers go higher and higher and you still notice (at least some people) that you still feel a little underwater. Why is that?
Well, you used to live like you didn’t have $75K a year. And then you saw that your pay got up to that level, so you bought those things you always wanted. At $100K your tastes in alcohol got a little more expensive. $125K brought on a house instead of renting — or even worse, you kept renting but in a much more expensive part of town. At $160K a year you ONLY wear certain things and eat certain places, and you’ve even gone as far as to literally swear off things from your sub-$75K a year former lifestyle.
Your lifestyle has changed over time. Some would say that it has even “crept” up.
(See where I’m going with this?)
People often confuse their Disposable Income (the money they have to spend on things after taxes) and their Discretionary Income (the money they have to spend on things after taxes AND bills). Especially in cases of lifestyle creep.
What I’m trying to illustrate for you, in this section specifically, is that you can’t afford to confuse the two. Not if you’re a regular person in a single-income household in this day and age.
You have to keep in mind that making $100K a year means that you likely really only bring about $70K home after taxes. And that doesn’t even include bills associated with your daily living expenses or surprise things that pop up.
Some simple math on this for example…
Say you make $100K a year in salary.
Subtract $33K in Taxes
Subtract $45K in Rent/Food/Other Unavoidable Bills
Subtract $10K in Other Necessities (Transportation, Clothes, etc.)
That leaves you with $12K in real discretionary income when all is said and done. And that’s being nice. The $10K is definitely negotiable above, but I’m counting that end because for many people there’s no getting around that — you need what you need.
$12K a year translates to $1K a month that you have to play with.
If you put anything away in savings, take it out of that $1K a month.
If you pay any type of credit card bill, take it out of that $1K a month.
Do you have a kid or pet? Ok – take it out of that $1K a month.
Do you like movies? Buying gifts? Do you date? Do you drink? Ok – take that out of the $1K a month.
Do you see what I’m saying here?
Keep in mind that, according to the Bureau of Labor Statistics‘ “Usual Weekly Earnings of Wage and Salary Workers [Third Quarter 2021]” Report (released October 19, 2021), The “median weekly earnings of full-time workers were $1,001 in the third quarter of 2021.” Multiply that by 52 to get a rough figure for a full year – that’s $52,052. Half of us made more than that at the time, and half of us made less.
So… Many people aren’t even talking about $100K annual salaries normally. That was genuinely just numbers tossed up there to keep the math simple.
The proportions likely stay similar in terms of expenses, but that leaves HALF OF US with LESS THAN $1K a month in real discretionary income to mess around with after the fact…
So, yeah — $200 house shoes can add up is all that I’m saying and really cost you a bit more than you anticipate if you aren’t wise with your money and habits.
Spend your money how you want. Hell — enjoy your money! That is part of why we work. But also invest your money. Save some of your money.
Some people do just fine spending by the seat of their pants. But… yeah, a lot of people don’t.
If you take anything away from this rambling post, remember that small habits can screw you financially. Especially if you don’t keep the difference between your disposable (after taxes) and discretionary (after taxes AND bills) incomes in mind.
Have a plan. Be smart with your money. Be frugal most times and have fun every now and then. Understand how your cash flows and “ball hard” – but responsibly.
And for the love of all things — PLEASE don’t have champagne taste on a beer budget.