Why So Many Families Feel Broke at Higher Incomes

If you take a drive through a suburban neighborhood, you will probably see signs of financial success. Large houses, luxury vehicles, well-maintained landscaping, and more. The families occupying those houses are probably 6-figure earners and are saving tons of money for their future.

Unfortunately, more and more 6-figure households are feeling the pressure of a rising cost of living and are living paycheck to paycheck more than ever before. While their lifestyle might project a scene of financial prosperity, inside the house, they are actually stressed and overwhelmed. There are few factors that can attribute to this.

The cost of living in Colorado is higher than it has ever been before. A recent report from the Colorado Chamber of Commerce states the Colorado is the 3rd most expensive state to live in, after being the 16th most expensive state in 2022. The median price of homes across the region continues to rise and mortgage rates staying stagnant over the last few years means those leaving low-interest mortgages are seeing a spike in payments.

Another issue affecting higher-income families is “lifestyle inflation”. As income increases, so does spending. People want to update their cars to newer luxury brands. They may decide to spend money on a home renovation to increase the value and update the look of their home. Going on one vacation a year turns into several vacations that seem to add up. As the kids get older, they get more involved in activities that cost money. 

While it’s easy to update your lifestyle as your income increases, it’s important to ask yourself why. Some people want to project a sense of wealth by buying newer things and posting nice vacations on social media. Is it for themselves or the people around them? Pressure to compare to others in your neighborhood or people you follow on Facebook intensifies. We have all heard the phrase “Keeping Up with the Joneses” and it’s truer now than it has ever been. For some, social status matters and they are paying the price to achieve it.

There are ways to keep lifestyle inflation from creeping into your spending. Buying moderately-priced vehicles, or leasing if you like to drive new, can save you on vehicle costs. Buying the right-sized house for your family is another way to save. The larger the house, the more maintenance, cleaning, and updating goes into it. Vacations are so important for families to travel together and create memories, but planning cost-effective trips and having savings for travel can help you spend time with your family without going broke.

The good news is that financial stress is often fixable with intentional planning. Families who feel financially confident typically focus less on appearances and more on alignment between spending and long-term goals. Increasing savings before upgrading lifestyle, re-evaluating priorities, and building a clear financial plan can make a tremendous difference. Even if costs go up, having the flexibility to shift your spending habits and prioritize savings will be the key to your success.