I’m living on the same salary I made when I first moved to Florida about 15 years ago. It’s not that I still make the exact amount of money. It’s just that I’ve forced myself to live on a set amount of money. I invest, use some of the money for better health insurance and save the rest. A recent article by Daily Finance, it’s smart to live as though you never got a pay raise or bonus. One man wrote about how he is living on his salary from 2011. While I haven’t gotten a pay raise in several years, my salary has increased overall by $10,000 since I took a full-time job 15 years ago. Prior to that, my income was extremely unpredictable due to my independent contractor work as a writer. I pretend I have a fixed income even though different variables make is easier or more difficult to balance my budget.
Taking a lifestyle cut
A lot of people spend any bonus or pay raise they get by getting a nicer car or a buying a step-up home in a better neighborhood. While I can’t do anything about inflation in general, I can put a stop to so-called “lifestyle inflation.” If I want to improve my lifestyle, I find free and inexpensive ways to beautify my surroundings. Sometimes, I simply take the time to make a more elaborate gourmet meal with ingredients from my garden instead of dining out at an expensive restaurant.
Knowing my priorities
Knowing my financial priorities has helped me stay on track with my budget. Ten years ago, I wanted to buy a single-family home. I saved up money for the down payment. Now, I want to pay for my son’s college tuition. I wouldn’t be able to budget for a new home and college at the same time. If I didn’t know my financial priorities, I’d probably spend my higher salary on both college and a down payment on a newer, bigger house. According to the Daily Finance article, it’s best to ignore a pay raise. The writer said he increases his 401(k) contributions by the same amount as his cost-of-living increase. Fifteen years ago, I was making $10,000 less than I make now. That extra $10,000 gets divided between a Roth IRA, which I didn’t fund 15 years ago as well as a 401(k) and health care contributions. When I retire, I will be a pro at living on a fixed income because I’ve been practicing all my adult life.
More from this contributor:
I Borrow From Myself Before Tapping Home Equity
Six Figures Isn’t Making Us Rich
First Person: I’m Keeping Up with Inflation, Not the Joneses