One thing I’ve noticed with some people is that they get progressively more stressed about money the older they are. That should come as no surprise. But it’s also no surprise that people tend to earn more and more money as they get older too. So shouldn’t things get less stressful?
One (of the many reasons) for this phenomenon is the tendency for people to mentally spend future increases in income ahead of time, which is similar to how people will tend to spend exactly what they earn now (if not more).
If you earn $50,000 (after tax) and you spend $50,000 after tax and you know that you are getting a $5,000 raise in the next three months how likely are you to use the increased income to better your financial situation? Do you commit the extra dollars to accelerating your debt repayments or funnel it towards savings and investing? Or do you plan on spending $55,000?
I’ll offer up a compromise: take half the increased take-home pay and put it towards savings or debt repayment and use the other half to scratch your itch to spend.
Something is better than nothing, but until you break the cycle of spending every penny you have coming in the door every future raise just means the knife-edge you are balancing on is higher and higher up from the ground.