Their burn was more than their earn, but their problem was much deeper than that.
I was shocked to hear that for all the money the were earning now, they were saving no more than they had been in little old Australia.
I caught up recently with some friends who had just come back from Los Angeles. They were Aussies originally, but had been living in the USA for the better part of a decade now.
I asked them how they were tracking.
She said they were doing well. She had a successful food blog. He had a good job producing reality TV shows. They were earning good money.
But they were spending good money too. They lived in a good neighbourhood (in LA, there’s a very big difference between a ‘good’ and a ‘bad’ neighbourhood) but they were still renting. They drove a nice car (she was actually surprised at how ‘old’ all the cars in Australia looked) but it was on lease. Their kids were in good schools, and had super-packed social calendars.
They had a good life and a good life costs good money.
“You know, it’s funny,” she said with a faint twinge of an American accent, “we actually moved there for the money.”
“Matthew wanted to work in TV, and the best TV jobs in the world are in LA.”
“And he’s on a great salary. But life in LA is just expensive. And financially, I don’t think we’ve got ahead at all.”
“I mean, I don’t think we put any more away each year than we did when we lived in Australia.”
“It’s not that I regret it. LA is an exciting place to live. But it’s exciting because it’s crazy and all that craziness takes its toll on your nervous system. So that kinda just balances out.”
“And so I just think we made this massive life decision “for the money” and really, I think we just came out even.”
She wasn’t looking for financial advice, so I didn’t give her any, but I don’t think there’s anything in her story that’s surprising.
In part, she has a technical problem. Savings is the difference between your earn and your burn, and as because they were unable to contain their burn, they simply spent every extra cent they earned.
This is really common, because it is actually really hard to be disciplined with your burn. You want to be able to enjoy your money, and enjoy the same standard of living as everyone around you. That very easily translates into a burn that cannot be contained.
But that’s simply a technical problem that a number of good systems could solve.
The deeper problem is really around their ‘relationship’ to money.
They were too complacent about where the next pay-cheque was coming from, and too lazy to be bothered controlling where it went.
They had always been ‘comfortable’, and so no matter how much they earnt, they would be just that: ‘comfortable’.
Not too fazed by money. Just puddling along. Never giving money the time and attention it deserves because “we’re doing brunch at Janet’s house after soccer on Saturday, honey.”
Their life situation – how much wealth they had created for themselves – reflected their relationship with money.
It always does. So does yours. Your wealth reflects your relationship with money.
And it just doesn’t matter where you go, or how much you earn, you cannot recalibrate your wealth if you cannot recalibrate your relationship to money.
This is an iron law.
So, isn’t it time you gave your relationship to money some energy?