Let me start with something that might sound strange.
A person earning $150,000 today can feel just as financially tight as they did when they earned $60,000 five years ago.
How is that possible?
This is exactly what we’re going to explore.
The Way Most People Think About Money
When we imagine financial progress, we usually think in simple terms.
Earn more. Life gets easier.
It makes sense, right? If more money is coming in, there should be more money left over. Bills should feel lighter. Savings should grow faster. Stress should go down.
But here’s what actually happens for most people.
They earn more. They spend more. And at the end of the month, the situation feels almost the same.
This isn’t because they’re being careless. It’s because there’s something about how money works that most of us never really learn.
The Difference Between Income and Financial Progress
These two things sound similar, but they’re not.
Income is simply what lands in your account every month.
Financial progress is what you actually keep and grow over time.
Think about it this way. If your salary goes from $70,000 to $100,000, your income has definitely increased. But if your expenses also go from $65,000 to $95,000, what has really changed?
You’re earning more. You’re spending more. But your actual financial position has barely moved.
This is the trap most people fall into without realizing it.
Why Expenses Rise When Income Rises
Here’s what typically happens when someone gets a significant raise or a better job.
First, there’s genuine relief. Finally, some breathing room.
But then, slowly, things start to shift.
The old apartment starts feeling too small. A bigger place seems reasonable now. The old car has done its job. Time for an upgrade. Eating out more often doesn’t feel like indulgence anymore. It feels normal. Maybe you move from a starter neighborhood to a nicer zip code. The kids switch to a private school or a pricier daycare.
None of these changes happen overnight. And none of them feel irresponsible in the moment.
But collectively, they absorb most of the income increase.
This pattern has a name. Economists call it lifestyle inflation. I prefer calling it normalization, because that’s what it actually feels like from the inside.
You’re not being extravagant. You’re just adjusting to what feels appropriate for your new income level.
The problem is, everyone around you at that income level is doing the same thing. So the new standard becomes the baseline. And the baseline keeps moving up.
The Factor Nobody Talks About: Purchasing Power
Now let’s add another layer that makes this even more complicated.
Your salary is a number. But what matters isn’t the number itself. What matters is what that number can actually buy.
This is called purchasing power.
Let me give you an example.
Say your salary increases by 5% this year. Sounds good.
But what if, during the same year, your rent increased by 8%? Childcare went up by 10%? Healthcare premiums rose by 12%? Grocery bills climbed by 7%?
On paper, you’re earning more. In reality, you’re falling behind.
This is happening to a lot of Americans right now, and it explains why salary hikes often don’t feel as meaningful as they should.
The number in your account is higher. But the things you need to pay for are becoming more expensive at a faster rate.
So you’re technically richer. But practically, life feels tighter.
Why Higher Income Often Means More Stress, Not Less
This is the part that surprises most people.
You would expect that as income goes up, financial stress goes down. But studies consistently show that’s not always the case.
Why?
Because higher income usually brings higher commitments.
Think about what happens when you earn more. You probably move to a better home. That means a bigger mortgage payment. You might put your kids in a better school district or private school. That’s a fixed cost you can’t easily reduce. You upgrade your car. That comes with its own loan and higher insurance. You start maxing out your 401(k), which is smart, but it’s also money you don’t see.
Each of these decisions makes sense individually. But together, they create a structure where most of your income is already committed before you even receive it.
This is the trap.
You’re not struggling to afford things. But you’re also not free. Every dollar has a destination. There’s no flexibility.
People in this situation don’t feel poor. They feel locked in.
And that creates its own kind of stress. The stress of having more to lose. The stress of not being able to slow down even if you wanted to.
The Real Problem: We Optimize the Wrong Things
Here’s something worth thinking about.
Most people spend enormous energy on:
- Getting better jobs
- Negotiating higher salaries
- Chasing promotions
And these things matter. I’m not saying they don’t.
But very few people spend the same energy on:
- Understanding where their money actually goes
- Building flexibility into their expenses
- Creating a structure where more income actually translates to more freedom
We optimize for earning. We rarely optimize for keeping.
And then we wonder why earning more doesn’t feel like progress.
What Actually Creates Financial Progress
So if income alone doesn’t do it, what does?
The answer is structure.
Let me explain what I mean.
Imagine two people, both earning $120,000 a year.
Person A has $100,000 in fixed annual commitments. Mortgage, car payments, student loans, childcare, subscriptions, insurance premiums. Only $20,000 has any flexibility.
Person B has $70,000 in fixed commitments. The remaining $50,000 can be adjusted based on circumstances.
On paper, they earn the same. But Person B has significantly more financial freedom.
If something goes wrong, Person B can adapt. Person A is one bad month away from stress.
This is what structure means. It’s not about earning less or living poorly. It’s about designing your financial life so that you have room to breathe.
The Mindset Shift
Here’s the thing I really want you to take away from this.
Earning more money is useful. I’m not arguing against that.
But without the right awareness, more money just means a more expensive life.
The expenses grow. The commitments grow. The lifestyle grows.
And you end up running faster just to stay in the same place.
Real financial progress happens when you start thinking differently.
Instead of asking “How much do I earn?”, you start asking “How much do I keep?”
Instead of asking “What can I afford now?”, you ask “What commitments am I creating?”
Instead of measuring success by income, you measure it by flexibility.
A Different Way to Look at Wealth
Maybe wealth isn’t about the size of your salary at all.
Maybe wealth is about options.
Can you take a break if you need to? Can you say no to work that drains you? Can you handle an unexpected expense without panic? Can you make decisions based on what you actually want, rather than what your commitments demand?
If yes, you have wealth. Regardless of what your income statement says.
If no, you might be earning well but living without margin.
Final Thought
The next time your income increases, pause before upgrading your life.
Ask yourself: Is this purchase improving my life, or just adjusting to a new normal?
The goal isn’t to never spend. The goal is to spend consciously.
Because financial progress isn’t about making more money.
It’s about making money work for your freedom, not just your lifestyle.
And that shift in thinking changes everything.