Why do we still struggle with money even after a raise? Learn how understanding the difference between needs and wants can change everything.
Mike’s income has more than doubled in the last few years, but oddly, so have his complaints about “never having enough money.” The issue isn’t how much he earns — it’s how he spends. Like many people, he hasn’t learned to distinguish between wants and needs, and that difference makes or breaks financial stability.
Since I started following a few simple rules consistently, my relationship with money has improved significantly. We’ll dive deeper into this and explore the 50/30/20 Rule — a simple budgeting method that actually works.
I’ve realized that most of our money problems don’t come from how much we make, but how we manage what we already have. For example, before buying a gadget or something new, I ask myself:
- Do I really need this?
- Will I use it often?
- Will it improve my productivity or quality of life?
If I can honestly answer "yes," I budget for it. If not, I walk away. This habit alone has made a huge difference in my spending — and I believe it can help others too.
When we start earning more, we often start spending more. We raise our lifestyle, buy unnecessary things, and try to maintain a standard that matches our income. But when that income drops, we feel broke — not because we don’t earn anything, but because we weren’t budgeting wisely when we had more. That’s what lifestyle inflation really is.
🔁 The Lifestyle Inflation Trap
Lifestyle inflation is when you start spending more just because you’re earning more. Instead of saving, investing, or clearing debts, you upgrade your car, move into a fancier place, or start eating out way too often. On the outside, it feels like success — but deep down, the money stress is still there. It just looks fancier now.
Most of us don’t even realize it’s happening. That raise? It feels like a green light to finally enjoy life a little. And sure, treating yourself now and then is fine — we all do it. But the real problem starts when every new “want” starts feeling like a “need.” That’s when your spending gets ahead of your earnings — and that’s where things start to slip.
🧍♂️ Mike’s Story: Doubling His Income, Doubling His Stress
Take my friend Mike, for example.
A few years ago, Mike was working a modest job and living within his means. He wasn't saving much, but he was managing. Then he got a promotion — a big one. His salary more than doubled. Logically, you'd expect him to be thriving financially. But that’s not what happened.
Mike upgraded everything:
- He leased a luxury SUV he didn’t need.
- He moved into a high-end apartment downtown, even though his old place was perfectly fine.
- He started eating out almost every day and bought new gadgets, clothes, and subscriptions.
Within six months, he was back to living paycheck to paycheck — only now, the stakes were higher. He had locked himself into expensive monthly commitments and didn’t have a plan for emergencies, let alone savings.
When I asked him how he was still struggling, his answer was simple:
“I honestly don’t know where my money goes anymore.”
Mike isn’t alone. He’s just a clear example of how more money doesn't automatically mean better money management.
The Root Problem: No System for Spending
Have you ever tried to find something in a cluttered desk drawer — like a ruler or a stapler? You end up digging through piles of random stuff, shifting things around just to find that one item. Then, once you're done, you toss it back in the drawer without thinking. Next time you need it? Same drill all over again.
Sometimes it gets so cluttered, you don’t even remember what you already own. So you go out and buy a new stapler, only to discover the old one buried at the back of the drawer when you're putting the new one away.
That’s exactly how our finances work when we don’t have a system.
If your bank account or spending history is a mess — with no budget, no categories, no clarity — it feels overwhelming. You don’t really know how much you’re earning, how much you’re spending, or where your money is going. Just like the drawer, it’s all a blur.
And in that confusion, two things usually happen:
- You overspend, because you think you have more money than you actually do.
- You underspend, punishing yourself by skipping small joys like eating out — not because you can’t afford it, but because you don’t know if you can.
The real issue isn’t how much you earn. It’s not even how much you spend. The real root problem?
This is one of the big reasons we avoid getting organized when we feel overwhelmed — and that’s exactly why budgeting scares us.
When we don’t have a clear picture of our finances, we tend to make impulsive spending decisions. We buy two or three coffees a day, telling ourselves, “It’s just a coffee.” But those small purchases add up. The ship doesn’t sink all at once — it takes on water slowly. By the end of the month, when we finally look at our spending, we’ve burned through hundreds of dollars… just on coffee.
Wants vs Needs: The Mental Framework That Changes Everything
It’s not really that difficult to draw a line between a need and a want. I follow a simple rule: if something improves my productivity or well-being, it’s a need. Everything else? It’s a want. That’s just my personal way of looking at it — you might disagree, and that’s okay.
So why does the line feel blurry sometimes? Because we’re constantly influenced — by our peers, emotions, habits, and especially marketing. Ads on Facebook, TV, and billboards are designed to trigger that dopamine hit and make us believe we need what they’re selling.
Take protein powders, for example. If you’re into fitness, you’ve probably seen ads featuring jacked, shredded bodybuilders. But let’s be honest — those physiques are often the result of years of intense training, competition prep, and in many cases, enhancements. They’re not your average gym-goers. The truth is, if you're eating well, sleeping enough, and staying hydrated, you may not even need protein supplements. But marketing makes it seem like taking that powder is the missing piece — as if it’s the magic key to becoming that ripped athlete overnight.
The 3-Question Filter for Smarter Spending
Whenever I want to buy something, I ask myself three simple questions:
- Do I really need this?
- Will I use it often?
- Will it improve my productivity or quality of life?
If the answer is “yes,” I set aside a budget for it and go ahead with the purchase — no second-guessing. The decision is already made.
But when I say “quality of life,” I don’t mean buying a Land Cruiser just because it’s luxurious. Sure, it's comfortable, but if I can get similar functionality and comfort from a RAV4, then going for the Land Cruiser doesn’t align with my values.
Improving quality of life isn’t about spending more — it’s about spending smarter. To me, it's about choosing things that support my productivity and well-being in a practical, sustainable way.
How to Create a Realistic Budget Without Feeling Deprived
There are many budgeting methods out there, and we’ll explore several of them in future blog posts. But today, let’s focus on one of the simplest and most flexible systems: the 50/30/20 budget rule — a percentage-based concept that gained popularity in the late 1990s.
This method stands out because it’s not tied to how much you earn, but rather how you divide your income into three key categories:
- 50% for Needs
- 30% for Wants
- 20% for Savings or Financial Goals
You don’t need fancy tools or complicated formulas. Just these three buckets. And yes, you can tweak the percentages based on your personal situation.
How Does the 50/30/20 Rule Work?
🏠 50% – Needs
These are your essential expenses — things you must pay to live and work:
- Rent or mortgage
- Utilities (electricity, water, gas)
- Groceries
- Transportation (fuel, public transport)
- Minimum loan repayments
🍕 30% – Wants
These are the non-essential extras that improve your lifestyle, but you could live without them if needed:
- Dining out
- Subscriptions (Netflix, Spotify)
- Social events and parties
- New clothes, gadgets
- Weekend trips or personal indulgences
Wants can be personal and vary from person to person. If you enjoy them, great — just keep them in check.
💰 20% – Savings & Financial Goals
This includes anything that builds your future or strengthens your financial health:
- Emergency fund contributions
- Investments
- Debt repayments (beyond the minimum)
- Saving for a house, a car, or a future vacation
Your goals may vary. The key is to make sure you’re consistently setting money aside for something that matters.
Example:
Let’s say your monthly income is $5,000:
- $2,500 (50%) for Needs — rent, groceries, transport, bills
- $1,500 (30%) for Wants — eating out, new clothes, a weekend trip to Gold Coast
- $1,000 (20%) for Savings — paying off a car loan or building an emergency fund
Free Budgeting Tool: Google Sheets Tracker
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📊 [Download the 2025 Income & Expense Tracker – Google Sheets Template]
Flexibility Is the Key
These percentages aren’t set in stone. If your needs currently take up more than 50%, don’t stress. Look for ways to optimize and save, such as:
- Paying insurance annually instead of monthly (I saved $200 this year doing this!)
- Buying groceries in bulk
- Cutting back on unused subscriptions
Small changes can lead to big savings over time.
Is This Rule for You?
You might be thinking, “There’s no way I can save 20% right now.” And that’s okay. Start small — even 5% or 10% is better than nothing.
The goal isn’t perfection. It’s awareness and progress. Once you track your expenses and start budgeting, you’ll feel more in control — and less overwhelmed.
Disclaimer: Some images in this blog are generated using artificial intelligence (AI) for illustrative purposes.
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