How Large a Role Does Income and Net Worth Play In Your Propensity to Save?

Do you think that high-income families clip coupons more or less than those on the lower-end of the spectrum? I don’t know the answer to this, but I was surprised when a friend of the family told my mom she would never considering clipping coupons. When my mom asked why she simply answered, “We don’t need to. My husband makes a lot of money.” She went on to tell my mom that she never looks at prices and rarely buys anything on sale.

Right now I consider my quest to save money a bit of a game. I enjoy walking out of the grocery store with a long receipt in hand. As soon as I get into the car I calculate my total savings and commend myself whenever I save over a certain percent. My husband can certainly attest to that fact. As soon as I walk in the door I tell him exactly how much I saved!

In my opinion there are two inputs to the savings equation. The first input is definitely income. This can come from your primary job, a hobby, a passion, whatever, but somewhere along the way you need to bring money home. It goes without saying that the more money you make the more money you can save, but it is also important to note that a high income alone won’t provide you with abundant savings. You also need to maintain a healthy, moderate lifestyle. In essence you need to ensure that your standard of living doesn’t rise significantly alongside your wage.

I personally think that thriftiness, frugality and solid money management practices are almost as important as income in the savings equation. After all, if you spend every cent of your humongous salary you may still wind up destitute and penniless. On the other hand, if you watch your money closely and carefully you can grow a large nest egg from a relatively small income.

Right now I try to save as much as I can because, oddly enough, I have fun trying to save money and because I aspire to lofty goals including paying off my mortgages and reaching financially Independence. But I wonder, once I reach financial Independence will I stop clipping coupons and digging through the sales circulars? Similarly if my income quadrupled would I still see the need or desire to save so faithfully?

I wonder how large a role income and net worth play in my propensity to save? At this point in my life saving money is simply a habit that I do not foresee quitting. I cannot imagine having so much money that I wouldn’t consider cost a factor in my purchases and decisions. I also imagine that my financial goals will continuously expand. Right now my goal is to pay off my mortgages and achieve financial independence, but after that goal is met who knows what other goals I might devise? Right now I cannot imagine a point in time where I will not save, but of course I don’t know what the future holds.

7 thoughts on “How Large a Role Does Income and Net Worth Play In Your Propensity to Save?”

  1. Right now, trying to save money is a necessity for me. I can't imagine that if circumstances changed and I had lots of money I would do things any differently. By now the habit of saving is very ingrained in me. Just because your income is high, why should you spend more than is necessary? Save your money for the things which you think are most important.

  2. I think there surely is a direct correlation between high income and propensity to save. The positive behavior and character traits that cause someone to be worth a high income will often cross over and cause that person to practice prudential personal finance.

    Personally, my wife and I do live on a budget and we are both frugal, but we rarely use coupons and we definitely could consider price more in our monthly purchases.

    However, I keep assuming we'll do more coupon clipping, and try harder to win "the game" of saving money once my wife gives birth to our first child this fall. Right now we both work full time (and we both often pick up overtime), so we justify slacking a little bit as a reward. It's just hard to justify using your day off to peruse Sunday newspaper circulars when our income is well over 200K. But I bet we'll change when we see how much we can save by watching for diaper/baby food sales.

  3. I think there's likely a loose correlation between the money that was available as one grew up and current spending habits, even at high current income. Growing up with just my mother working and money tight, I was very aware of spending habits. As an adult, I am more aware of sales and prices than my wife is. (Note, we both work, she makes a bit more than I do, I'm proud to say.) So things like grocery shopping is up to me. I probably save $4000-$5000 a year by timing purchases to match sales. A dollar saved takes about $1.75-$2.00 earned, so we're not talking small numbers. Who would dismiss $8000 so readily for a small effort?

  4. I'd agree with JoeTaxpayer that there could be a correlation between having less money growing up or earlier in life and spending habits later. I had a family member who became very wealthy, and her husband would tell funny stories about how she sent him back to the store because he forgot to use his coupon. Even though the price of things isn't an issue when you have more income, I don't believe in spending more than necessary.

  5. You know I have to agree with Joe Taxpayer as well. I definitely think ingrained habits from childhood and young adult may influence you more than any other factors including income and net worth.

  6. Some books on very wealthy people suggest that they got there partially by being so frugal. So, you never can tell by income alone.

  7. The Millionaire Next Door delves into this topic extensively; many folks that make handsome salaries have a net worth of a far lower ratio to their earnings than people of more modest means, simply because they know how to make their dollars stretch.


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