On spending horizontally


Disclosure: This article is not intended to be financial advice and information should be taken as educational only. Read the disclaimer.

We always want more, but which direction you head with it is important.

How would you go if you got that raise at work, started a new job on a larger salary or suddenly started making good money on the side?

Would you spend it all? 

Pay off debt?

Save it for later?

Not even notice it?

Not only is this something we might be dreaming of, but if we are doing our jobs well or striving to get better the reality is we’ll go through life getting bumps of income like these over the years.

If you’re any good you’ll get better and more experienced at your job or work to build your own business – more opportunities to earn more income.

You might find a spouse – another income in the household.

Debt’s get paid off, kids move out, dividends are solid – more disposable income.

Rather than a massive windfall of cash, these income changes happen gradually and slowly creep up on you. Suddenly you see more money in your accounts and you can now say yes to more things – cause more is better right?

This is called lifestyle creep. Your income rises and former luxurious become obtainable then become necessities. Things that are nonessential become a staple in the household. You start by treating yourself to things you’ve been unable to buy before. But hey, you’ve worked hard to get there so why not. 

So you do what ‘rich people’ do – you buy things

  • You see something shiny and new and think – “now's the time I can buy that thing.”
  • You outshine your neighbours, friends, family with the newest or best) iteration of something – “look at this new soundbar I just got”

You spend more on everything. 

Like Jordan Belfort in Wolf of Wall Street. Suddenly everything gets upgraded – the tv, car, house, clothes, travel, schools etc. Then when your income jumps another time, it happens again. And again and again and again.

You stack up all these things you’ve bought and you’ve created yourself vertical wealth. 

The vertically wealthy are those that chase a multitude of possessions and services, because they can. Everything in your life gets upgraded. Whether you ever wanted it or not is another story. 

The things is with vertical wealth, we upgrade anything and everything meaning the things we own have gone from good to great. There is no chance for the things that make us happy to shine through. They get drowned out by the mass of wealth we accumulate. 

Money can buy us happiness

What if you were more deliberate with your approach spending? 

Deliberate in that you specifically focussed on what your should and (more importantly) shouldn’t spend on, rather than assume every time you spend happiness will come. 

What if you only spent on the things you love?

 Not the stuff that others love that you see on TV, on the streets or on social media. The things that are applicable to only you. 

First you need to know what that is. Should be fairly simple, look around your house, your life and work out what you like to spend money on now.

Might be eating out, travelling, going to the gym or painting. It could even be driving fast cars, the convenience of a maid or owning a boat. 

Only you will know this. Make a list of 5-6 things that can make you happy right now – spending more money on just those will make you happier. 

This type of thinking can help you build horizontal wealth. 

So what happens now when your income increases? You have an idea already on the things you’d like to achieve. Eat out at that place that was always a bit too expensive, you get a personal trainer at the gym to help you get to that next level, or you buy the best quality art supplies. Invest in what you know makes you happy. No guessing, simply upgrade the things you like and hoard the rest. 

Beat the creep, focus on building what you know you love 

Lifestyle creep is real. It sneaks up on us and before we know it we feel poor maintaining a life of former luxury we turned necessity. 

Put yourself in a position of control for when that next bump of income comes. You are capable of building the life you dream of. It’s not important what the wealthy buy or accumulate with their money. Your money is good, don’t make bad choices with it to compete with others. 

P.S. Experiment with your money

I'm a big fan of using money as a way to find out more about yourself.

Through experiments you can test to see whether things you are dreaming about are going to make you happy. This can help you avoid accumulating vertical wealth by investing small, swift experiments to see if something is worth more of your money.

For example – You might have a long term goals like an extended overseas trip, early retirement, luxury car. Something you like the the idea of but have never really tried before.

With experimentation you can see if this is actually something you'll enjoy by taking out an aspect of that goal and spending some money on it.

For example you might take two weeks off work if your dream is to retire early or rent a luxury car for a week if its the one you've always wanted. The idea is to give yourself a taste (and a bit of reward in the process) to work out if this is really what you want.

No point in aiming to get somewhere for a decade or more only to realise its not even what you'd thought it'd be.

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Tim Ellis, creator of DadInvestor.com.au, helps people confidently invest and manage their money. Inspired by his own experiences, Tim is passionate about creating a financially secure future for his family and sharing his personal finance knowledge with others.