It’s fantastic to have a great job with a great income. Everybody wants that. It’s even better when these jobs come with certain perks and you may even find yourself exposed to things that earlier on, you could only dream off. I know people whose jobs pay their school fees, give them car allowances, entertainment allowances, phone allowances, premium medical benefits etc. There are people who also get to travel a lot as part and parcel of their jobs. Not just travel, but travel well. Five star accommodation is thrown in, first and business class air-tickets become the norm, healthy per diem allowances that enable them to eat and entertain well while travelling. If you do receive these benefits, by all means enjoy them while you have them. However there is a fine line that needs to be watched so this does not become a lifetime trap.
Sally is a media executive, and one of the people who receive these kinds of benefits from her job. She cannot remember the last time she paid her own phone bill, cable TV or looked at the school fees invoice. Her P.A. sorts these things out with the finance department and voila(!) children go to school, the phone works, cable TV is on etc. She was invited a few weekends ago to a friend’s birthday party out of town. When she got to the hotel, she did not like it and promptly went and checked herself into the kind of hotel she had become accustomed to during her travels. It was four times the price that she would have paid had she stayed in the first hotel. Since this is not work related, the money is coming out of her own pocket. This is not the first time Sally has made these kinds of decisions. She is known to hire luxury vehicles when away from home. She travels to holiday destinations with her family in first class, spends copious amounts of money on luxury brands etc. This is the fine line I alluded to earlier. Sally is trying to keep up with a lifestyle that her employer often finances. She has lost touch with reality i.e. what she can afford vs. what her employer can afford.
Before this job, Sally would easily have just stayed put in the normal hotel that was hosting the birthday party. However her work has exposed her to a lifestyle that she now really enjoys. She however thinks because her employer can afford to pay for it, it then means that she too can afford to pay for it. The firm that Sally works for makes hundreds of millions in profits every year. They can afford to have their executive management travel well. Sally, though with a very decent salary, does not make hundreds of millions per year. Because of this, she cannot make the same spending decisions that are made by her employer. She should take a step back and really evaluate whether those kinds of choices will end up working for her. What your employer can afford for you is not necessarily what you can afford for yourself. Sally is living a lifestyle that was chosen for her and she has now become identified with it. As opposed to seeing that it is the firm she works at that choses to stay at luxury hotels, she has confused it to mean that she is the one who stays at five star hotels. It is the firm’s lifestyle, not hers. The firm can replace her and will send the new person to the same five star hotel. That decision has got nothing to do with the individual in that seat. The day that profits in the company dip, that policy can easily become two star hotels and whether or not Sally had gotten used to five star treatment will not be of any concern to the company.
The other problem is that since she is so caught up living the lifestyle of her employer, she is not aggressively investing (Click to Tweet this). Yes she has some savings, shares and even some property. However she has not come close to investing in a way that will maintain this lifestyle that she is building up. If she lost her job today, gone is the lifestyle. One of Sally’s friends owns a tomato farm and has interests in other business ventures. Every so often they would coordinate travel schedules so that they can meet up. Sally believed that because they enjoy similar lifestyles, they have similar levels of wealth. I politely pointed out to her that her friend could actually afford to do that. If she decided not to work for three months her farm would still run and she has invested in a way that secures her lifestyle (Click to Tweet). She can afford those trips on the money that her investments are making for her, but Sally can’t. As you enjoy the benefits of your job, look very closely at whom you have started assuming is at the same level as you. Who have you started trying to keep up with?
Many executives are comparing themselves to other people on the basis of having similar lifestyles, instead of really looking at what kinds of things are making people afford that lifestyle. What is behind the scenes? For the financially intelligent ones, you will see that it is not just on the basis of this month’s salary. (Click to Tweet this) Isn’t it crazy that Sally was trying to live the same lifestyle outside work, as the owner of that company would? Take stock. What is your employer paying for you that has become your new normal? Can you really afford it? What choices would you have to make if you did not have that job? And while you are earning, what choices are you making to ensure that you can sustain this lifestyle? At this stage, should you be spending money on the same lifestyle as your employer? Avoid the trap of living your employers’ lifestyle. Remember: wealth is what works when you are not working.
To learn more about Personal Finance Management: wise spending, investing, financial growth and much more, click here to learn more about the Centonomy 101 program.
Waceke Nduati-Omanga runs programs on Personal Finance Management, Entrepreneurship and Career Success.