Rachel Cruze, alongside Dr. John Delony, recently addressed a common yet startling issue on their show: high earners living paycheck to paycheck. Despite incomes between $100,000 to $300,000, many individuals feel financially strained.
This phenomenon, often stemming from lifestyle creep and comparison culture, signifies a deeper issue where people fail to manage their finances effectively, regardless of their high income. Here’s how to get back on track if you’re making six figures but still struggling to make ends meet.
A Case Study in Action
Cruze revisited a call from a couple with significant debt despite a high income. The couple had around $150,000 in car loans and $280,000 in student loans while earning a net income of approximately $330,000 annually. This scenario highlights the stark contrast between high earnings and poor financial management.
Addressing the Root Problem
The couple’s situation revealed that money problems are often deeply personal and rooted in one’s choices and lifestyle. Cruze emphasized the necessity of lifestyle changes to manage and eliminate debt effectively. She pointed out that simply earning more money isn’t the solution if spending habits remain unchecked.
The Shock of Lifestyle Change
For this couple, the recommendation was clear: drastic lifestyle changes were necessary. This included selling their expensive cars and cutting their living expenses. Cruze suggested living on a significantly reduced budget (for them that would be $75,000 a year) and using most of their income to pay off debts.
Behavioral Changes for Long-Term Impact
Cruze says focusing on behavioral change is crucial. Paying off debt in one sweep without altering spending habits fails to address the underlying issues. According to her, the couple needed to feel the impact of their sacrifices to foster lasting change.
Empowering Financial Decisions
Cruze encouraged the couple to use their substantial income to turn their financial situation around rapidly. By selling their high-value assets and aggressively paying off debts, they could shift from being high earners with substantial debt to financially free individuals.
The Importance of a Budget
A key takeaway from Cruze’s discussion is the importance of budgeting. Regardless of income, following a strict monthly budget is crucial for financial health. Tools like budgeting apps can be instrumental in this process.
Cruze’s advice serves as a wake-up call for those experiencing lifestyle creep. It underscores the fact that making money and managing it are two different skills. Even those with six-figure salaries can find themselves in a worse financial state than individuals earning much less but managing their money wisely. The key is to recognize the need for change and take decisive steps towards financial freedom.
Editor's note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates' editorial team.
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