Does Life Get More Expensive The More You Earn, And Other Money Questions

Have you seen the money related conversation starter cards circulating in the social media lately?

It is the Financial Service Council NZ teaming up with Hatch investment platform who brings us these downloadable cards that each have a money related question to answer.

I thought I’d do a post series of personally answering a few of these questions in each post and inviting you to share your own answer to the same question in the comments! You can download your own set here.

Does life get more expensive the more you earn?

It doesn’t have to, but often it does.

This is called a lifestyle creep. When you earn more money you might buy a more expensive house so your mortgage cost gets higher, you might get a more expensive car, or multiple cars.

Your hobbies might get more expensive, and your job might take more of your time so you pay for convenience, like meal services such as Hello Fresh or My Food Bag.

Your job might require a higher standard of personal grooming so you might feel pressure to spend more on clothes, and other things relating to appearances.

When you earn well, often people also think that they don’t need a budget anymore because they don’t have to worry about making ends meet.

But this often leads to money disappearing to unnecessary spending.

So, in short, life doesn’t need to get more expensive with a higher pay, you just need a plan for your money at all income levels!

How do you protect the things you value?

With insurance.

There are a lot of insurance cover options out there, and truly something for every need (after all, JLo insured her bottom!!).

Personally I am currently very underinsured as I currently only have vehicle, contents and house insurance and an outdated income protection (although I believe it would only cover redundancy).

It is definitely something I need to look at, especially trauma and further income protection for myself and my partner.

Eventually I would like to be self-insured, which simply means that I have enough money saved and invested that I could cover various big expenses caused by unfortunate events or cover living expenses without work.

How does taking a career break impact someone’s financial situation?

Depends on the situation.

If it is well planned then it doesn’t need to make a big difference at all.

Although even financially well planned career break could impact career progression and possibly you might miss some pay rises during your break. You also might not be able to keep up with new skills.

Another financial impact of a career break is the impact on your KiwiSaver (or any retirement savings plan) balance. This can be huge, especially depending on when the career break is happening. If it is very early on, it can have a big impact on the retirement savings balance.

This could be countered with voluntary contributions during the career break.

Unexpected or just unplanned career break can have a big impact.

The same ones apply as above, but it also could mean financial stress or going into debt to finance living during the break.

Sometimes career breaks are inevitable, or a wish in order to stay at home with kids. But a great thing would be to plan it well ahead to avoid detriment to financial situation.

You can find other money questions and answers here.

I’d love to hear your answers to these questions in the comments below!