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August 15, 2002

So This Guy Walks Into a Bar ...

"Hey ... what're ya makin' over there?"

Money, he means. What sort of money am I making. This gentleman I don't know − this man whom I've never seen or spoken to before in my life − has decided he wants to know how much money I make at my job. (I'm a warranty administrator in a dealership service department, which he just found out.) He is entitled to this knowledge, apparently, because we happen to have a mutual friend who's sitting between us at the bar, and because we happen to be drinking the same brand of imported beer.

Now, first off, I'm pretty sure it's none of this guy's business how much money I make doing what I do. If he'd pay attention, he'd figure out that − like him − I make enough to buy myself imported beer even though it's "$.25 Draw Night" at this particular establishment. Second, I'm not sure what it is that makes knowing someone's salary so gosh-darn interesting.

A few authors have written that Americans focus on salary levels simply because we're all so infatuated with spending and acquiring the newest stuff. A person's spending ability is determined by their salary, or so we figure. But it isn't, really. The way credit cards are flying around these days, it's awful easy for someone to project a $75,000 appearance on a $30,000 salary. And payments on all those make-the-neighbors-drool luxury cars and SUVs now can be ... uh ... affordably ... spread out over six years or more. ("Payments tailored to fit your budget," the auto dealer ads claim. Ha! Anybody who's financing that amount of jack on an item which depreciates that quickly probably wouldn't know a household budget if it hit him in the schnoz.)

Of course, nobody ever asks you, "So ... what's your net worth?" or "How much you got saved up at the credit union?"

But, as they say, "C'est la burrito." Six-digit salaries used to impress me, too. But now I try to look at it another way. For instance, which person's financial position would you rather take over as yours:

(1) The guy who makes $100,000 per year, makes payments on his shiny new Lexus, and owes close to $55,000 total in credit-card, business, and various other unsecured debts, plus has a $230,000 mortgage;

(2) The guy who makes $50,000 per year, drives a paid-for five-year-old Toyota Camry, and is debt-free except for his $70,000 mortgage.

I know which one I'd take, and it ain't Mr. Lexus.

Still, if all you care about is having "lots of stuff," then climbing your way to a large income will probably help you get there. But please know this: A high income does NOT equal "wealth." A high income does NOT equal financial success. More often than you'd think, a high income equals higher spending, which then equals higher income requirements (read: more work) to keep the same standard of living going. This will likely also be the case when the time comes for one to retire − and may determine whether or not he is able to retire at all.

Michael | August 15, 2002

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