You would imagine that someone earning R50,000 a month should be financially comfortable. Yet even relatively high-income South Africans are struggling with debt and finding it difficult to make ends meet.

Perhaps the better question isn’t “How much do you earn?” but “What do you do with what you earn?”

More Income, More Spending

One of the biggest traps in personal finance is lifestyle inflation.

Get an increase and the car gets upgraded. Earn a bonus and the holiday becomes more expensive. As income rises, spending on homes, restaurants, clothing and entertainment often rises with it.

Before long, someone earning R50,000 can feel just as financially stretched as they did earning R25,000.

The income changed. The behaviour didn’t.

Your Money Habits Follow You

If you spend everything when you earn R20,000 a month, chances are you’ll find ways to spend everything when you earn R40,000.

Money management isn’t only about mathematics. It’s about behaviour.

We spend for enjoyment, convenience and sometimes status. We compare ourselves with friends and colleagues. And when the money runs out, credit makes it possible to keep spending.

Ironically, a higher salary can give you access to even more debt.

It’s What You Keep That Matters

Consider two people.

One earns R60,000 a month and spends R59,000. Another earns R35,000 and consistently saves R5,000.

Who is building the stronger financial future?

Income matters, but wealth is created from the money you don’t spend.

That’s why saving shouldn’t be whatever happens to be left at the end of the month. Often, nothing will be left.

Instead, save first and spend what’s left.

Beware the Lifestyle Ratchet

The problem with lifestyle inflation is that it’s easy to move up and surprisingly difficult to move back down.

Yesterday’s luxury quickly becomes today’s necessity. The bigger house, better car and expensive holidays become part of the normal monthly budget.

Eventually, much of your salary is committed before payday even arrives.

Give Your Increase a Job

When you receive an increase, don’t automatically increase your lifestyle by the same amount.

Enjoy some of it. Use some to reduce debt. Save and invest the rest.

That way, as your income increases, your wealth increases with it.

Remember, wealth is often invisible. It’s the emergency fund, investments, retirement savings and manageable debt that other people don’t see.

So perhaps financial success shouldn’t be measured by how much you earn.

A better measure is:

How much of what you earn are you keeping and using to build your future?