America’s HIFI’s are spending a fortune to look rich, even if they are draining their bank accounts.
This group typically earns six-figure salaries and is more likely to be millennials or Gen Zers, according to Sherwood News. They spend money on luxury fashion, travel and restaurants – or taking inspiration from their favorite celebrities or responding to sOciaL TRENDS.
HIFIs often live “beyond their means,” spending more than they earn rather than directing funds toward long-term wealth-building strategies, said Natasha Knox, founder of financial planning and wealth management firm Alaphia Financial. Wellness.
“They’re spending every cent they make and not leaving a dime,” she said, adding that many hifis seek her services. “They don’t feel safe because, on some level, they know something is wrong.”
Inflation and the rising cost of living in the US are partly to blame for HIFI’s precarious financial situation. Inflation rates are double what they were 10 years ago, according to the Bureau of Labor Statistics. The consumer price index for US cities, which estimates cost of livingit also grew by about 8% in the last 10 years.
The psychology of HIFI spending comes from a desire to belong
Knox said there is often a disconnect between how much money HIFIs make and how much they can afford to spend.
For example, Knox said many people base their expenses on their gross income, but don’t consider how much of their paycheck goes toward taxes, a 401(k) or big bills like rent and groceries.
HIFIs also tend to overspend when they receive a bonus at work or other financial perks. She said she’s seen customers split their bonus over multiple large purchases — sometimes spending the money “three times over,” she said.
“We all have ways we give ourselves permission to adjust our lifestyles, the things we tell ourselves,” Knox said.
Much of the psychology of HIFI spending comes from a desire to belong, Knox said. People want to be able to afford the same clothes or concert tickets as their friends and family, so they keep spending money.
Knox added that people’s desire to fit in with particular groups and feel rich can lead to long-term lifestyle drag.
Small changes in spending can increase wealth in the future
Many people underestimate how much small spending changes can affect their overall wealth, Knox said. Many HIFIs she works with are not in debt, but also don’t put enough of their income into their savings account.
HIFIs should consider how much they need to meet their retirement goals and pay for large purchases, along with saving money for emergencies or unexpected expenses.
“It’s not that they have to have more income, but they have to calibrate their spending to be within their income in order to save,” Knox said.
Although saving money can seem daunting, Knox said small, everyday spending decisions can make a significant difference to the fortunes of HIFIs over time. For example, people can still spend money on clothing, travel and social activities – but they must set budgets and keep a close eye on their spending. She said she works with clients on ways they can make decisions that aren’t financially damaging but still allow them to enjoy their lifestyle.
“I think most people really underestimate how wealth can or how assets can be accumulated little by little,” Knox said. “And, in turn, small reductions in overspending can make a significant difference.”
Are you a HIFI? Are you struggling to afford your lifestyle, even with a high income? Are you open to sharing your story? If so, contact this reporter at allisonkelly@businessinsider.com.
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