In 1997 music artist Christopher Wallace (a.k.a. Notorious B.I.G or “Biggie”) released the album “Life After Death” posthumously (OK, so his estate released the album).
The album was extremely successful and included a popular song entitled “Mo Money Mo Problems” which eventually claimed the #1 spot on Billboard’s Hot 100 List.
Although the song focuses on Biggie’s adversity growing up on the “streets” and his eventual tribulations as a successful East Coast Rapper, the chorus line “The more money we come across, the more problems we see” is relatable to just about anyone’s personal finance situation.
7 years ago my family and I had multiple money problems. Ironically, the more money we made, the bigger our problems seemed to get! Fortunately, with hard work and a plan, we were able to systematically pay off all of our non-mortgage consumer debt and move on with our lives.
So why do we seem to have more problems as we make more money?
Keeping Up With the Joneses:
Part of it has to do with keeping up with the proverbial “Joneses”. As a society, we have a tendency to judge others by their material possessions then we emulate our perceptions of these people by buying material things of our own.
As we make more money, we purchase evan more expensive luxuries (with credit) to create the illusion we have more money! Talk about irony; we are going into debt to look wealthier!
Emphasis on Monthly Payment(s):
You may recall my article on the negative effect of pay raises last year. When I was “young and dumb”, I never cared about the total price of my big ticket items (vehicles, motorcycles, TV’s, etc). I only cared about how much my monthly payment was going be.
I found out I was getting a pay raise at work…the responsible thing to do was use the added income to cover financial obligations I already had…instead I used the extra $300 a month to purchase a brand new motorcycle just like my friends’.
I knew there were more importing things to do with this extra money; I just wasn’t mature enough to do them. In my mind I NEEDED to keep up with Jones, and “easy” monthly payments made it possible!
Don’t create “mo problems” for yourself just because you’re making “mo money”. Use the extra cash to pay down your debt, build up your emergency fund, or invest it in a tax advantaged retirement account.