Can you actually afford your lifestyle?

There was a period of my life where every time I made more money, I got significantly better at spending more money.

At first, this felt great. I stopped checking my bank account before agreeing to dinner. I took the Uber when it was raining instead of walking 15 minutes to the train. I ordered groceries when I was busy. I started traveling more.

But lifestyle creep, as the name suggests, has a way of sneaking up on you. A few years later, you look around and realize your income has gone up substantially while your financial situation… hasn’t.

I hear some version of this constantly: I know I make good money. Why do I still feel broke?

There’s a lot of evidence that this feeling extends surprisingly far up the income ladder. Goldman Sachs found that about 40% of Americans earning over $300K are living paycheck to paycheck, and PYMNTS found over 60% of people earning $100K-$150K are paycheck to paycheck. Among those $150,000-plus earners, nearly half described their situation as the result of choice, rather than necessity.

That distinction is why I don’t particularly love “paycheck to paycheck” as a catch-all measure of financial distress. It can describe someone who genuinely cannot cover the cost of their life and someone who could create breathing room but doesn’t. Those are very different financial problems, even if both people end the month asking the same question: Where the hell did all my money go?

I’ve written before about the structural forces making this worse — how housing, childcare, healthcare and education are much, much more expensive relative to income.

Which is why I’m not particularly interested in telling someone whose rent went up $600 to stop buying coffee. But even for people who make decent money and aren’t experiencing true material precarity, I don’t think the answer necessarily is a stricter budget.

What I would build instead, and what I help my financial planning clients build, is a financial system.

A traditional budget often asks you to make hundreds of small decisions every month. A good financial system asks you to make a handful of important decisions, build them into the plumbing of your life, and then periodically make sure that plumbing is still sending money somewhere you actually want it to go.

There are three pieces to this:

• Awareness tells you where your money is going
• Your values help you decide where you actually want it to go
• Your financial architecture turns those decisions into defaults

Here’s how I’d build it.