When my husband and I were deep in the throes of paying off our wedding debt a few years ago, I started obsessively reading personal finance blogs. I learned a lot of practical tips from Frugal Dad, The Simple Dollar, Get Rich Slowly and other Wisebread stalwarts. But one of my biggest ‘Aha!’ moments came courtesy of debt guru Dave Ramsey, and his dictum to “Act your wage.” Dave meant, ‘Spend only what you can afford,’ but I took it more literally. How much would a financially responsible person making my salary spend?
Honestly, I had no idea.
I’d always associated keeping up with the Joneses with “Housewives of” behavior: the slavish label-following, the obsessive focus on appearances and chic experiences. One look at my 14-year-old car and you’d know that’s definitely not me. But, I realized, my perception of how my peers were living had actually been driving my spending and my financial health.
When I was 24 and about to move to Manhattan, for instance, I asked a coworker at my temp job what he thought the minimum salary would be to live comfortably in New York City. He was ten years older than me, an ex-pat New Yorker, and I’d met him filling in at the IRS; I thought he’d know his financial stuff. He thought deeply, then said: “Thirty thousand dollars.” Unfortunately, I was moving for a job that paid $20,000. (This was 20 years ago, mind you.)
As a result, when I landed in the East Village of Manhattan a month later, I clutched my cash tight. I felt like I was already deep in the hole, so I thought over every expense. I walked 30 minutes to work. I bought used books and $5 beers. When I hit the diner for breakfast on weekends, I tried to go before 9am for their $1.99 special. I turned off every light as soon as I wasn’t using it. (One month, my electricity bill was $13.) I saved money that year.
But then I got another job: One that paid a big $25,000. That’s 25% more paycheck! I thought giddily. It wasn’t quite the magic $30K, but a year of fairly easy survival had dulled my financial fear. I immediately got a bigger, more expensive apartment. I started eating out more. I started going out more. It never struck me as anything to be wary of, because my friends and peers were doing it too.
I figured we were all making about the same salary, so we should all be able to do the same things, right?