Welcome back to the Net Worth Podcast.
Speaker 2: This week we are diving into why high income doesn’t always translate to high net worth and ah how emotional spending can silently sabotage your financial goals.
Speaker 1: Check out the full edition on our website wearenoyack.com.
Speaker 2: So, you know, if you’re like a lot of people listening, maybe you’re earning a really significant income.
Speaker 1: might be cracking six figures, maybe even seven.
Speaker 2: And yet when you look at the big picture, your overall financial situation, you kind of feel like, well, like you should have more to show for it, right?
Speaker 1: It’s this common, confusing paradox, especially for professionals.
Speaker 2: You millennials, Gen Z, you’ve worked hard, climbed the ladder, made good news professionally, but the wealth, it just doesn’t seem to be keeping pace with the paycheck.
Speaker 1: And that can be, well, incredibly frustrating.
Speaker 2: It really can.
Speaker 1: And that feeling, you that disconnect you’re describing, that’s precisely the core problem this edition of Noyack Wealth Weekly digs into.
Speaker 2: It frames it perfectly, I think.
Speaker 1: The real challenge isn’t just about how much money you make.
Speaker 2: That’s important, obviously.
Speaker 1: But critically, it’s about how much of it you manage to keep.
Speaker 2: And often, the missing link isn’t a gap in income or even not knowing enough about finance.
Speaker 1: Instead, it’s frequently rooted much deeper in emotional spending and these subtle psychological traps that can quietly undermine wealth building, even for people who are really smart, really astute professionally.
Speaker 2: OK, so let’s unpack this a bit.
Speaker 1: What exactly is going on there?
Speaker 2: You’re making good money, solid income, but the net worth number just isn’t moving the way you’d expect.
Speaker 1: feels so…
Speaker 2: Full counter-incuitive.
Speaker 1: You’d think more automatically means more stays, more grows.
Speaker 2: Where’s it leaking out?
Speaker 1: Yeah, it’s fascinating.
Speaker 2: And what this edition really highlights is that high earners often face this almost invisible but really potent pressure to spend.
Speaker 1: It kind of moves beyond basic needs, know, survival stuff, and gets deep into identity.
Speaker 2: People aren’t just buying things or services anymore.
Speaker 1: They’re subconsciously…
Speaker 2: uh buying into an identity.
Speaker 1: Think about it, right?
Speaker 2: That really sleek condo downtown, the uh boutique gym membership, maybe those expensive dinners out every week at the trendy spots.
Speaker 1: These aren’t just purchases, they’re signals.
Speaker 2: They send a message to yourself and to others.
Speaker 1: Look, I’ve made it.
Speaker 2: Or this is who I am now with this success.
Speaker 1: It’s like an unspoken cost that comes with achievement.
Speaker 2: That’s where it gets really interesting for me.
Speaker 1: Because it’s not strictly irrational, is If you could look at the underlying drivers, it’s deeply psychological.
Speaker 2: Can you explain a bit more about how our brain actually plays into this?
Speaker 1: Is there like a literal chemical thing happening when we spend?
Speaker 2: Oh, absolutely.
Speaker 1: is.
Speaker 2: The science, which this edition touches on, it shows that spending, especially that impulsive or identity driven kind, it strongly activates the brain’s reward system.
Speaker 1: We’re talking specifically about the dopamine fueled nucleus accumbens.
Speaker 2: You can think of it as like your brain’s instant gratification button.
Speaker 1: So every impulse buy, every purchase that maybe eases some stress.
Speaker 2: or boosts your self-worth for a moment or just reinforces that identity you want, it delivers these short-term hits of dopamine, fleeting satisfaction.
Speaker 1: But the critical part, the often damaging part, is that this immediate reward frequently bypasses your bigger long-term financial goals.
Speaker 2: It effectively swaps out potential compound growth, real wealth accumulation for a temporary chemical buzz.
Speaker 1: It’s almost like our biology is working against long-term financial discipline sometimes.
Speaker 2: Wow.
Speaker 1: Okay, so if our brains are kind of wired for these quick hits, What does that actually mean for our money, for building net worth?
Speaker 2: This edition of Noyack Wealth Weekly points out several key ways these emotional forces chip away at wealth.
Speaker 1: Let’s start with one they call invisible lifestyle inflation.
Speaker 2: What’s that about?
Speaker 1: Right.
Speaker 2: Invisible lifestyle inflation.
Speaker 1: It’s sneaky because it’s often not about buying things you truly need for a better life functionally.
Speaker 2: It’s more about upgrading because you feel you need to for your identity or your perceived status.
Speaker 1: So this leads to spending that doesn’t really add to your net worth, it just lifts your baseline cost of living.
Speaker 2: And this lifestyle creep, it’s not just a small thing like, oh, I spend a bit more on coffee.
Speaker 1: It can seriously squeeze your ability to invest, to accumulate real assets over time.
Speaker 2: The addition gives some great examples, suddenly feeling you need the nicer car because your income went up, or the apartment upgrade that feels more you now, or maybe those luxury vacations shifting from a rare treat to something you just expect every year.
Speaker 2: Each step feels justified on its own, but add them up.
Speaker 1: They eat into the capital that could be growing for your future.
Speaker 2: And it’s not just about the things we buy, right?
Speaker 1: It’s also about these mental shortcuts, these biases.
Speaker 2: You’d think smart, high-earning people would be kind of immune to that stuff.
Speaker 1: We’re supposed to be rational, especially with money.
Speaker 2: But the sources suggest even really intelligent people fall for these.
Speaker 1: How come?
Speaker 2: Yeah, that’s a really important point.
Speaker 1: And the truth is, being smart doesn’t give you a free pass from cognitive biases.
Speaker 2: Sometimes it actually makes them harder to spot in yourself.
Speaker 1: This edition specifically calls out the I deserve this spend bias, where we rationalize purchases as rewards for hard work or markers of success.
Speaker 2: And look, maybe sometimes they are, but the danger is that these justifications, while they feel good psychologically, can silently undercut your net worth momentum.
Speaker 1: They divert money away from investments towards emotional payoffs that often don’t last.
Speaker 2: And we can get more specific based on this edition.
Speaker 1: First, there’s lifestyle creep as a bias itself.
Speaker 2: It’s not just the spending, it’s the story you tell yourself.
Speaker 1: I’ve worked hard, I deserve the premium coffee, the designer upgrade, the spontaneous trip, that internal monologue.
Speaker 2: It slowly erodes financial freedom as your baseline costs just rise and rise with your income, leaving less room to save or invest.
Speaker 1: Right, the justification loop.
Speaker 2: Exactly.
Speaker 1: Then there’s confirmation bias.
Speaker 2: High earners, even with sharp critical thinking skills at work, might unconsciously look for advice or articles or even friends who validate their current spending habits.
Speaker 1: Like, you might eagerly share something saying travel is an investment in yourself.
Speaker 2: Which, okay, maybe it is in some ways, but ignore the fact your investment portfolio hasn’t grown or you haven’t upped your savings rate.
Speaker 1: It’s about finding proof for what you want to believe is okay.
Speaker 2: Seeking out the echo chamber that agrees with your spending.
Speaker 1: Precisely.
Speaker 2: And finally, the sunk cost fallacy.
Speaker 1: This was powerful.
Speaker 2: It’s when you keep pouring money into something that pricey gym membership you rarely use, a subscription you barely touch, maybe even a bad investment just because you’ve already spent so much on it.
Speaker 1: The decision isn’t based on its current value or future potential, but on not wanting to feel like you wasted the money already spent.
Speaker 2: It’s an emotional trap that keeps capital locked up where it’s not doing you any good.
Speaker 1: It’s clear our own internal wiring and these biases are tough enough.
Speaker 2: But then you throw in the modern world, the digital age.
Speaker 1: those constant, perfectly curated highlight reels on social media.
Speaker 2: That adds a whole other layer, doesn’t it?
Speaker 1: Oh, it absolutely does.
Speaker 2: And this edition notes how social influence can actually hit high earners even harder.
Speaker 1: See, at higher income levels, the game of social comparison doesn’t stop.
Speaker 2: If anything, it escalates.
Speaker 1: The goalposts shift.
Speaker 2: It moves from maybe just, am I doing OK?
Speaker 1: To, am I doing better than the next person?
Speaker 2: Am I keeping up with the perceived success in my network?
Speaker 1: You see…
Speaker 2: friends posting about fancy vacations, new businesses, maybe buying a second home, and it can spark this subconscious feeling of being behind.
Speaker 1: Even if, objectively, you’re doing great financially, your brain is just constantly taking notes from those curated feeds, and unfortunately, that often translates into opening your wallet to try and match up.
Speaker 2: It’s like a treadmill feeling inadequate, fueled by curated images.
Speaker 1: Okay, so we’ve got the psychology, the environmental triggers, like social media.
Speaker 2: This edition…
Speaker 1: clearly outlines how these behaviors hit our bottom line.
Speaker 2: Beyond just maybe feeling a bit bad about spending, how do these emotional patterns directly damage our net worth?
Speaker 1: What are the tangible consequences?
Speaker 2: Yeah, the consequences are pretty direct, and they can be really significant.
Speaker 1: uh First, that invisible lifestyle creep we talked about, driven by identity and status, it directly, sometimes drastically, reduces your savings rate, which obviously lowers the amount of income you actually have available to invest.
Speaker 2: Less money in means less money working for you.
Speaker 1: Simple as that.
Speaker 2: Right.
Speaker 1: Less fuel for the growth engine.
Speaker 2: It’s agsicly.
Speaker 1: Second, that emotion-fueled spending could be stress shopping, could be keeping up with the Joneses, buys at diverts cash away from appreciating assets.
Speaker 2: Money spent on a rapidly depreciating luxury car or another expensive trip you didn’t budget for is money not going into stocks, real estate, things that can genuinely grow your wealth over the long haul.
Speaker 1: And third, those unchecked biases, the I deserve it thinking, The sum cost fallacy, systematically weaken your financial discipline.
Speaker 2: And without that discipline, your long-term goals like financial independence or early retirement can get seriously derailed.
Speaker 1: They just get pushed further and further away.
Speaker 2: Ultimately, as this edition puts it, this constant diversion of capital steals stability.
Speaker 1: It shifts your foundation away from solid investments toward these fleeting emotional fixes.
Speaker 2: It’s a quiet erosion of your potential future wealth.
Speaker 1: Okay, it’s definitely clear these patterns are chipping away at wealth, often silently.
Speaker 2: even for really successful people.
Speaker 1: But knowing this is one thing, changing these deep habits is something else entirely.
Speaker 2: So how do we actually turn this around?
Speaker 1: How do we make emotion work for our net worth instead of against it?
Speaker 2: This edition does offer some concrete strategies, right?
Speaker 1: It does.
Speaker 2: And connecting it all, I think the key isn’t just about having more willpower.
Speaker 1: It’s about making your understanding of the spending psychology your actual superpower.
Speaker 2: It’s about building a financial system that works with your brain’s tendencies, not constantly fighting them so you can build wealth that’s robust, not fragile.
Speaker 1: It really comes down to being super intentional.
Speaker 2: And the first strategy, maybe the most powerful one highlighted, is to automate your investments first.
Speaker 1: Or as they put it, use defaults to your advantage.
Speaker 2: This means setting things up so a portion of your income goes straight to savings and investments before you even see it in your main account, before you can make a decision to spend it elsewhere.
Speaker 1: Basically, exactly.
Speaker 2: Your paycheck lands and boom, a percentage is automatically sent to your investment account, your retirement fund, wherever you adapt to living on what’s left.
Speaker 1: It leverages inertia in a positive way.
Speaker 2: Next, it’s really crucial to know your triggers.
Speaker 1: And this isn’t just theory.
Speaker 2: It means paying attention.
Speaker 1: This edition suggests maybe keeping a simple spending journal for a month or two.
Speaker 2: When do you tend to overspend or make impulse buys?
Speaker 1: Is it after a stressful meeting, late at night scrolling on your phone?
Speaker 2: Figure out when emotion takes over, and then you can proactively disrupt that pattern.
Speaker 1: Like, if scrolling leads to buying, maybe put the phone away an hour before bed.
Speaker 2: Identifying the weak spots.
Speaker 1: Precisely.
Speaker 2: Then there’s a fascinating technique.
Speaker 1: Cultivate the pain of paying.
Speaker 2: In our cashless world, tapping a card or clicking buy feels almost painless, right?
Speaker 1: It bypasses that natural reluctance to part with money.
Speaker 2: So to make spending feel more real, try using cash for discretionary stuff sometimes.
Speaker 1: or uh implement a mandatory 24-hour, maybe even 48-hour waiting period before any significant non-essential online purchase.
Speaker 2: That pause, it forces your thinking brain to engage instead of just reacting.
Speaker 1: Interesting.
Speaker 2: Making it a bit harder to spend impulsively.
Speaker 1: Yeah.
Speaker 2: Another big shift is to redefine rewards as returns and track identity-based wins.
Speaker 1: Instead of getting that satisfaction hit from buying something new the car, the clothes consciously shift your sense of pride to actual financial progress.
Speaker 2: Celebrate hitting a savings goal, reaching a new net worth milestone, seeing your passive income increase.
Speaker 1: Start tracking your network regularly.
Speaker 2: Watching that number climb can become a much more satisfying and sustainable reward than any temporary purchase.
Speaker 1: It actively fights the pull of consumption.
Speaker 2: Trading the shopping high for the net worth high.
Speaker 1: You got it.
Speaker 2: The fifth strategy is about values.
Speaker 1: Codify your values.
Speaker 2: Seriously, take some time, maybe sit down and write out what you genuinely care most about.
Speaker 1: Is it freedom?
Speaker 2: family time, health, experiences.
Speaker 1: Once you’re crystal clear on those core values, use them as a filter for your spending.
Speaker 2: When a potential purchase comes up, ask yourself honestly, does this actually align with what I say is most important?
Speaker 1: That clarity makes it so much easier to say no to impulse buys that don’t really serve you.
Speaker 2: Aligning spending with what truly matters.
Speaker 1: Exactly.
Speaker 2: And finally, create a margin of safety.
Speaker 1: This isn’t just about having an emergency fund, although that’s vital too.
Speaker 2: It’s about intentionally building a gap between your income and your spending.
Speaker 1: Don’t spend right up to the limit.
Speaker 2: That gap, that buffer, that margin, that is where wealth actually accumulates.
Speaker 1: That’s where opportunity lives.
Speaker 2: It’s where you gain real financial freedom and resilience.
Speaker 1: It’s the space where your money finally starts working for you instead of just passing through.
Speaker 2: Yeah, that makes a lot of sense.
Speaker 1: This edition of Noyack Wealth Weekly really drives home the point that just earning a high income isn’t enough to build long-term wealth, not unless that emotional spending piece is understood and managed.
Speaker 2: The real leverage, like we’ve talked about, seems to be in making sure every dollar spent either serves your net worth goals or at the very least doesn’t actively sabotage them you’ve put in the work to earn the income.
Speaker 1: Now it’s about mastering the psychology to earn the outcome you really want.
Speaker 2: Remember to subscribe to Noyack Wealth Weekly on our website wearenoyack.com, to read the article behind today’s conversation and to get our weekly newsletters straight in your inbox.
