Feeling Poor

How in the world can they afford that?

Have you ever wondered why so many others seem to have more money than you do?

Responsible = Feeling Poor

I took some time off for a vacation in Arizona over Christmas and New Year’s holidays a few years ago. We went to Sedona, AZ, which is famous for red rocks canyons. We saw ads for helicopter rides in tourist brochures. “That sounds nice.” But at $200 per person, we thought it was too expensive.

As we walked down the canyons, we heard helicopters and other small planes buzzing overhead all day long. Enough number of others must have more money than we do.

Prior to arriving at Sedona, we looked for hotels. We narrowed down our choices to two hotels, one at $85 a night, the other at $120 a night. Not sure whether the more expensive one would be any better, we booked the $85 one.

Big mistake. The walls were so thin at this hotel that we could hear people in the next room talking. By the time we wanted to switch to the other hotel at $120 a night, it was sold out! Enough number of others must have more money than we do.

During the evening, we watched a Say Yes to the Dress show on TV. It was about four or five brides selecting their wedding dresses at a store. When asked about a budget, the brides threw out numbers like $3,000, $7,000, or $10,000 for the dress. When we heard the numbers, we looked at each other. Wow, they must have more money than we do.

When we flew in, I saw people whipping out their iPads on the plane. I’d like to have one too. I offered to buy one for my wife with the hope of using it myself sometimes, but she declined saying it was too expensive. We know Apple sells millions of iPads. Enough number of others must have more money than we do.

Back home, I heard a guy calling the Clark Howard show on the radio asking about insuring an engagement ring. When Clark asked him how much the ring was worth, he said $10,000. He really has more money than we do.

I don’t know what’s going on. I thought we make good income. Why do so many others still seem to have more money? Other than the usual story of “consumerism run amok,” are there more logical explanations?

I thought about this for some time and I came to a handful of hypotheses. Tell me which ones are right.

Selective Memory

We only observe where others spend more than we do but they are not the same people each time. People who took helicopter rides didn’t also book the more expensive hotel and buy an iPad for each member of their family and buy a $7,000 wedding dress and buy an $10,000 engagement ring. We don’t see where they are spending less.

I’m not frugal king. I’m sure they would see me waste money on something they don’t. We just choose to spend money on different things.

Income vs. Discretionary Income

Income and discretionary income are not the same thing. A large percentage of our income goes to taxes, housing, and savings for retirement. Retirees living in a paid-off home have very little of those expenses. They don’t need as much income to have more money to spend whereas our income after taxes, housing and savings for retirement can be much less than the top line number. When you measure discretionary income, we really have less.

Less Savings, More Credit

Along the same lines, if others aren’t retired living in a paid-off home yet, taxes, housing, and savings for retirement can still equalize the discretionary income quite a bit. If others don’t save as much for retirement, they will have more money to spend. If they use credit, they will have more money to spend.

Regardless how others make or spend their money, you are responsible for your own bottom line. Do the right thing. It will pay off in the end.

This story originally appeared in my blog The Finance Buff where I share my experience in managing my financial life.