Can You Earn Too Much to Be Good With Money?

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The following is a contribution from Nell at The Million Dollar Diva. If you’re interested in contributing to Frugal Rules, please consult our guidelines and contact us.

Earning more money seems to be the holy grail of the internet. I mean, no one’s searching Google on how to earn less money, right?

But could earning a lucrative salary make you broke?

I know, you think that’s a crazy idea. I mean if only you earned an extra $20k (or $30k or $100k) a year, all your money problems would be solved. You’d be able to pay off the mortgage faster, pay down all those student loans and invest some serious dollars to eventually retire early.

Yet unfortunately that’s not always how it works. The reality is that as our income grows, so does our budget.

Does Your Budget Grow with Your Income?


Take me, for example. I’m earning way more now than I was in my first job out of college. Yet my savings ability is pretty much the same. And what I’m earning now is actually a pay cut from my previous job where I was earning some serious cash (and seriously wanting to poke my eyes out every Monday). And yet each time my income has changed, my budget has grown or shrunk to match. It’s actually a lot of work to focus on saving the excess, instead of just spending it.

Okay, so maybe that’s not a great example. I mean, my income is pretty average. So what about people on seriously ‘un-average’ salaries? People like doctors, lawyers, and stockbrokers? These people are earning huge salaries and so should have significant equity, right? But instead, what often happens is that people who work hard to gain high paying jobs then feel justified to spend that money on huge houses, expensive holidays and depreciable assets (also known as shiny things).

I recall a client of a firm I worked for who came to us for financial advice – he wanted some help with his retirement planning. The advisor took one look at this guy’s balance sheet and declared before he could do anything else, he needed to make a budget and get his spending under control.

The More Money You Make, the Easier it is to Live Beyond Your Means


This guy was earning $700,000 per year (no that’s not a typo), yet he was carrying $25k in credit card debt. With four kids at private school and a million dollar mortgage, he was struggling and had absolutely no idea where all his money was going.

Think about it, if you’re pulling in $20,000+ each pay check, you’re hardly going to blink an eye when the car needs new tires or the dog has to go the vet. Things that people on average salaries have to save up for a year on more (such as overseas holidays) can be bought with only a moments thought.

But imagine what would happen if he lost his job, or couldn’t work because of illness. What if he couldn’t pay the mortgage and the school fees?

We all know that if you are living right on the limit of what you can afford, then any crisis can quickly escalate. And it’s much easier to crawl out of a $300,000 hole than it is a $2,000,000 one.

The more time I spend working in the financial services industry and reading personal finance blogs, the more I’m convinced that earning more money is not always the key to becoming wealthy. In fact, earning more money could be doing more harm than good.

Rather than focus on increasing income, we should focus on the quality of our spending. Ask yourself, does what you buy improve your life? Does it help you reach your goals faster, or just put them another step out of reach?

And if you are lucky enough to be earning salaries that most of us can only dream of, then don’t waste it on short term wants. Invest it and take charge of your future.


Do you think there is such a thing as making too much money?


Nell is a freelance writer and blogger living in Australia. She writes about personal finance at The Million Dollar Diva. When Nell’s not thinking all things money, you’ll find her at the local coffee shop researching her next overseas trip.


Photo courtesy of: JMR_Photography

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I'm the founder of Frugal Rules, a Dad, husband and veteran of the financial services industry. I'm passionate about helping people learn from my mistakes so that they can enjoy the freedom that comes from living frugally. I'm also a freelance writer, and regularly contribute to GoBankingRates, Investopedia, Lending Tree and more.


  • Living below your means is the best key to have a financial stability. It’s not about how much money you make but how you save it and of course the lifestyle matters. I do have a friend that makes almost triple of my income but still surprisingly she even came to me and asked me if I can lend her some amount.

    • Kostas says:

      Exactly, Clarisse, if you are living below your means there is more of a tendency to be able to save and not get into those problems that over spenders have so frequently. If you do not know how to budget, no matter how much you make, you can land yourself in a tough financial spot.

    • Exactly Clarisse. It’s sometimes surprising that people earning good money don’t seem to have a handle on their finances. It’s definitely all about living below your means.

  • I think people that don’t want to think about their money might see a high income as an excuse to not worry about how close to the edge they are living, but the same might be said about those with a very low income. “I’m already in the red, so why not add more debt!?!”
    Mostly i think attitude and developing good habits matters more in the long run than just earning more money.

  • The Warrior says:

    Being one who has allowed my budget (in the past) to increase with pay increases, I can understand the $700k guy’s struggle. Not saying it’s right, but saying that I understand.

    When building a budget, the key is coming up with the numbers to live just comfortable enough to be able to save like crazy. That budget shouldn’t change, as I now know, just because there is more coming in. You still should be living just comfortable enough and now be able to build the wealth even faster.

    It’s a tough dilemma that, thankfully, I’ve learned how to deal with.

    The Warrior

  • While I understand your point that making more money isn’t really the solution, for some people it is. Yes, the difference between making $100k and $300k might be minimal, but if you are making $50k and owe $1k in student loans, have a mortgage, etc. you may be doing everything you can to spend wisely. If you increased your income to $80 or $100k it could make a material difference for you financially. Making more money through my side hustle has had a huge impact on my personal finances, and I think sometimes making more is what people should be focusing on.

    • Hi DC. I think the point is that it’s not necessarily about making more money. If you haven’t got your priorities sorted and your budget set, then no amount of money in the world is going to help you. But if you are focused on your goal (ie paying off debt or financial independence), then making an extra $20k a year is going to help you get there faster.
      Oh, and I’m definitely not saying don’t try to earn more money. I’m working on a side hustle myself 🙂

  • I think that can be true in certain cases. A lot of our family members are extremely higher earners and appear to struggle to take family vacations, etc. I don’t get it. But, they let their expenses rise right along with their income, so it makes sense.

  • Pauline says:

    The more I make, the more relaxed I get about not being financially perfect. However with multi millions I don’t think I’d go totally crazy with spending. I have a hard time imagining how people spend thousands and thousands in a shopping spree.

    • HI Pauline – I think that if you are earning a bit more then you can afford to be a bit more relaxed in your spending. But having a budget, no matter what your income, is the key.
      Oh and I reckon I could easily spend thousands in a shopping spree, if someone wants to let me give it a try 🙂

  • Matt Becker says:

    The key point here is really that income alone doesn’t determine wealth. No matter what your income is your wealth will be determined by how well you use it. There are many cases where earning more money can make it a lot easier to live the life you want, but it certainly isn’t automatic.

  • Personally we have not changed the budget due to a rise in income, rather adjusted the amount that was put towards savings and investments. I think if you start earning a lot more then there is the temptation to reward yourself with larger items or toys more often. You may feel entitled to these purchases after working hard for that large income. Either way you still have to stay in control.

  • The more you earn the more you’re prone to think you don’t have to live within the confines of a budget. There’s a huge difference between having a large income, and being wealthy for sure. Great perspective!

  • I think it really depends on the person. We have friends that have always had debt and money troubles because they spent every cent they earned and then some – and they didn’t make that much. They both ended up cashing out their 401ks this year. Recently, we noticed that their spending had really gone through the roof (high-end home theater equipment, clothing shopping sprees, paying for ski resort passes, trips across the country, etc) and we couldn’t figure it out. Especially as we knew A. they had no savings at all and B. they wanted to get married, would have to pay for the wedding themselves, and had already said they had no money for that. Turns out, they both started making more money.. and promptly started spending even more. In the meantime, we’ve slowly been adding to our income, but our spending has kept going down and we’re constantly working on adding to our savings and investments. All that’s a long way of saying I think it really depends on your knowledge of finances and your understanding of money!

  • While I know there is lifestyle inflation, once you’ve lived off of minimal income, I think you always know how to do it again. The one exception would be children. The “stuff” you accumulate and their associated expenses can always be gotten rid of or sold, but children, they’re not exactly an expense you can discard.

    • I think people know how to live off minimal income, but it’s not necessarily automatic to keep spending low when your income increases. When I was a student I didn’t have a lot of income, but I was pretty satisfied with what I had. Then when I started earning more, I wanted to spend more.

  • As soon as I read the title I thought, “well I’d like to test that theory!” lol! I think it’s easy to say you wouldn’t fall prey to lifestyle inflation, but I admit if I made a lot more than I’m making now, I’d have a new budget for clothing, dinning out, and more for travel. Maybe not extravagant, and I wouldn’t have debt, but my lifestyle would change because I’ve been hunkering down so long. As long as its kept at a manageable level I think SOME lifestyle inflation is OK. An no, I don’t think you can make too much money.

  • Lifestyle inflation is a real thing, but I’d hope that someone making 700k per year could at least stay out of debt! It’s easy to feel as though you can afford anything with that salary, but you still need to budget. If I was making that kind of dough I would definitely change my spending habits, I wouldn’t be as frugal, but I’d still save and invest so that when the gravy train dries up, there is still enough left over to maintain my lifestyle.

  • I don’t think you can make too much money, but there are certain expectations society places on the ultra high earners. You would be seen as very odd if you made a million a year and drove an old Civic. It’s always a balance between enjoying your money and making it work for you and spending on things you don’t need and that don’t make you happy. I only need so much to live. If I made lots more, I would use it for setting up scholarships for kids instead of buying a Mercedes, but that’s a learned perspective. I’m not sure if I would have said that ten years ago.

    • It’s easy to say what we would do, but until you get in that position you just don’t know. I’d really like the chance to find out though 🙂
      I probably wouldn’t drive an old Civic, but I don’t think there’s much difference in cars above $50k (also, I know nothing about cars and don’t even own one)

  • It is just the simple concept of lifestyle inflation as your income grows. People make more and then want more. It happens all of the time, unfortunately.

  • Michelle says:

    I definitely think that when you make more money, that you start comparing yourself to others who make even more, and it’s easy to fall into the trap of spending to keep up. Also, when you make a ton of money (such as $700K a year), it can be easy to think that you don’t need a budget and that you don’t need to keep track of your spending.

  • Lifestyle inflation has bit me in the butt on more than one occasion. At least now I recognize it when it starts creeping into my head and I can kick it out by choosing to fund my SEP IRA or my kids 529 College plan. Important for me to get rid of the money and lock it in some long-term investments.

  • Romona (@monasez) says:

    You can never make too much money but if you’re making more money and you haven’t learned how to manage money quite yet then the amount of money you make doesn’t make a difference.

  • I think it really comes down to what kind of financial fundamentals that you had in place before you started earning the big bucks. It’s very easy to let your budget fluctuate based on your income as a bit of “I earned it”. That’s fine if you still have your basis covered by staying debt free and continuing to save. It’s not what you make it’s what you keep. It always blows my mind when you hear of the star athlete that made $100 million over his 10 year career, and now he’s filing bankruptcy. Also, with doctors, lawyers… sometimes they get caught up with acting the part, even if they don’t necessarily want it. Situations where all their co-workers driver BMWs, Mercedes, Porsche and here they are in their KIA. It takes a pretty strong person to not give in to that.

    While I make good money right now, I’ll gladly give $700k a shot as an experiment to see how the budget would change. My guess is a little bit, but not much. Of course I have the goal of FI/possible ER, so I have a drive and end goal that’s bigger than the actual things money can buy.

    • “It’s not what you make, it’s what you keep” – that’s so true.
      Yeah, I’ve heard of a few Aussie sportstars who are now struggling because they burned through all their money during their (shortlived) sporting career. They now provide financial counselling/education to younger sportstars in an effort to curb the high rate of debt/bankruptcy amongst high paid players.

  • My brother is the perfect example of this. While he does have some massive loan debt from law school, he could have easily paid that off with the salary he’s made for the past four years. He’s made some damage and isn’t frivolous with money but he’s also not debt free. It really takes hard work and determination to try to live exceedingly below one’s means.

  • Kathy says:

    We are fortunate to be at a point in our lives where our needs are few and our wants are actually fewer. We have a good pension and enough investments so the dividends and interest actually doubles our income from pensions. No social security till next year. But we have everything we want so it has actually been difficult to think of something to wish for for Christmas this year! So while I don’t think you can ever have too much, I do think you can reach more than enough.

  • I think a key is to keep expenses the same even while income goes up. The thing is, many people see more income as a way to have nicer things. A better approach, in my view, is to see extra money as being a way to save more for the future.

  • Micro says:

    Lifestyle inflation is a big thing that needs to be kept in check for anyone looking to save money. I can understand how there is no way to protect against the mentality change. If you’re paycheck inflates to the point where emergencies can be covered with the extra cash instead of an emergency fund, it would be hard to not adjust to that kind of buffer. While the money keeps flowing you would be fine, however, if it stops you would find yourself in a very different environment and not realize it.

  • Jen @ The Happy Homeowner says:

    It’s really important to maintain as much balance as possible, no matter how much money you make. It’s definitely understandable that a larger salary could lead to an avoidance of budgeting, but there should still be measures in place for managing your money well and protecting your future!

  • Reminds me of one of my favorite quotes “It’s not how much you make, it’s how much you keep.”

    Lifestyle inflation is hard to deal with though. I find that I even loosen the grip on my wallet just a little bit with each new raise or promotion. It’s not totally a bad thing, but keeping it in check is always important.

  • It drives me crazy when I hear people say they want to make enough so they don’t have to budget. I’m sure investors would freak out if Apple decided they had enough cash and didn’t need to budget anymore. If we expect them to maximize profits, why don’t we expect it from ourselves?

  • Lifestyle inflation is an American tradition. I often see that with people who have been deprived for years, then get a high paying job. I did that early on and I regretted it.

  • dojo says:

    Yes, yes, yes! Earning more does lead to ‘lifestyle inflation’ if you’re not careful. You’ll instantly have ‘needs’ you never had before and spend money on things that were never really relevant to you.

  • I wish I had more of this problem! Well, not really. I’ve gone through some major lifestyle inflation since I got my first permanent, full time job and my online income started taking off. Lately I’ve been trying to scale it back.

  • We’re totally going through the other end of “lifestyle inflation” right now. My husband was about 65% of our income just a month ago, and since he lost his job, that’s sunk to 33%. It’s not really so much that we were living beyond our means; it’s that our means changed. But what’s interesting is that we haven’t really had to alter much, because we’ve been in frugal savings mode for a long time anyway (we were saving for our wedding, and he lost his job right after we got back from the honeymoon). I can totally see the temptation, though, to become less stringent about where your money goes as your income goes up. Still — it sounds like a temptation I’d be totally fine with having 🙂

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