The more money I make, the more money I have.

When people asked me how much I made (back when I had a job and felt it was contextually appropriate to share such traditionally-intimate information), I told them. $110,000.

But I was making a big mistake. Sharing it wasn't the mistake. Believing it had any relevance was the mistake.

And the answer is not net-income or after-tax income either.

I’m suggesting we focus more on our lifestyle-adjusted income.

[ Lifestyle adjusted income = Gross income - Taxes - Inevitable lifestyle expenses ]

Inevitable lifestyle costs

Many necessities in life are inevitable and they come with a cost. Food, water, and shelter are your most common necessities. Plus, in the modern age, the case can be made for connectivity. Your phone plan, home internet, and transportation have become necessities.

Now factor in your lifestyle. Your lifestyle, largely determined by your profession and the city or town you choose to work in, will significantly influence the expenses associated with these inevitable expenses.

Whether you choose to work in a big city or a small town, your lifestyle-adjusted income could look significantly different after taking into account all the different costs of living a big city or small town life.

In the city, expenses associated with rents or mortgage payments, insurance, food, and socializing will all be higher.

Your city job may have a lengthy commute forcing you to be away from home for longer periods. You eat out more often, are stressed more often, and have less time to keep up with your everyday life of spending time with family, eating healthy, exercising, and maintaining your home.

You have to order in groceries or takeout, hire a nanny, hire a cleaner, hire a personal trainer, and go on vacations to de-stress just to keep up.

Before you know it, your income is looking like a lot less. Perhaps it’s still higher than the small town alternative, but it might be low enough for you to reconsider if the time-demanding profession in the high-cost of living location is all worth it.

Plus, we haven’t even factored in the very real influence of lifestyle creep. You want a nicer home in a nicer neighbourhood with a nicer car in the driveway. It's a vicious and never ending cycle.

If there is one thing you take away from this article, let it be this;

Inevitable lifestyle expenses are lifestyle driven, and if our lifestyle is not inevitable, then the associated inevitable expenses are not either.

Inevitable is context driven

Lifestyle costs are only inevitable when the lifestyle is present. The big mistake we make is assuming that the lifestyle is inevitable too. We assumed it was too.

Ella and I's lifestyle forced us to pay for rent, insurance, utilities, car payments, charging our car, groceries, takeout, and phone plans.

We realized that many of these primary expenses were lifestyle-driven and asked ourselves if we could change our lifestyle and the associated expenses.

In September 2023, after years of deliberating, we moved out of our apartment and set off as digital nomads. In the past 2 years, we have travelled to countless countries and visited family all around the world.

In this time, we have significantly reduced most of our inevitable expenses from our existing lifestyle…

• We lowered accommodation costs through a combination of staying with family, housesitting, and living in low-cost of living locations.
• We reduced our utility expenses effectively to $0 by using wifi, heating, and cooling at the accommodations we visit.
• We eat takeout much less as we now have the time to grocery shop and food prep.
• We opted for lower cost monthly phone plans and feel less of a need to upgrade devices.

How to calculate your lifestyle adjusted income

This personal finance calculation requires a simple formula:

[ Lifestyle adjusted income = Gross income - Taxes - Inevitable lifestyle expenses ]

So when I left my $110,000 job in 2023, I originally had the mindset of needing to replace my $110,000 of income.

BUT I DIDN’T HAVE THAT MUCH MONEY IN THE FIRST PLACE.

• -$25,000 owed to taxes.
• -$12,000 owed to rent.
• -$2,400 owed to takeout
• -$960 owed to our internet bill
• -$720 owed to a phone plan
• -$600 owed to charging our car
• Approximate Lifestyle adjusted income = $68,320

I had $41,680 less than I thought I did because I focused on gross income. I was drastically over-inflating how much money I had. If I changed my lifestyle, I could change the inevitable lifestyle expenses that came along with it.

Wrap it up!

• Gross income is irrelevant. Unless you’re doing your taxes, wipe it from your memory.
• Lifestyle adjusted income and lifestyle creep are not the same thing.
• Our profession and place we live significantly influence our lifestyle which comes with inevitable lifestyle expenses. The more costly the city we live in and the busier we are, the higher these expenses are.
• By acknowledging these inevitable expenses, lifestyle adjusted income is a more effective way to measure your actual income and understand the impact your lifestyle has on your financial freedom.
• You can more accurately see how much of your income is automatically tied to the lifestyle you’re living and largely out of your current lifestyle’s control (unless you change your lifestyle).
• After calculating your lifestyle adjusted income, you can make a more informed decision on whether or not your profession and/or living location are worthwhile for the actual amount of money you’re earning, amidst the various tradeoffs of the inevitable lifestyle expenses you’re tied to.