Why Others Seem to Have More Money Than You Do

Have you ever wondered why so many others seem to have more money than you do?

Over the Christmas and New Year’s holidays I took some time off for a vacation in Arizona. We went to Sedona, AZ, which is famous for red rocks canyons. We saw ads for helicopter rides in tourist brochures. “That sounds nice.” But at $200 per person, we thought it was too expensive.

As we walked down the canyons, we heard helicopters and other small planes buzzing overhead all day long. Enough number of others must have more money than we do.

Prior to arriving at Sedona, we looked for hotels. We narrowed down our choices to two hotels, one at $85 a night, the other at $120 a night. Not sure whether the more expensive one would be any better, we booked the $85 one.

Big mistake. The walls are so thin at this hotel that we could hear people in the next room talking. By the time we wanted to switch to the other hotel at $120 a night, it was sold out! Enough number of others must have more money than we do.

During the evening, we watched a Say Yes to the Dress show on TV. It was about four or five brides selecting their wedding dresses at a store. When asked about a budget, the brides threw out numbers like $3,000, $7,000, or $10,000 for the dress. When we heard the number, we looked at each other. Wow, they must have more money than we do.

When we flew in, I saw people whipping out their iPads on the plane. I’d like to have one too. I offered to buy one for my wife with the hope of using it myself sometimes, but she declined saying it was too expensive. We know Apple sold millions of iPads. Enough number of others must have more money than we do.

Back home, I heard a guy calling the Clark Howard show on the radio asking about insuring an engagement ring. When Clark asked him how much the ring was worth, he said $10,000. He really has more money than we do.

I don’t know what’s going on. I thought we make good income. Why do so many others still seem to have more money? Other than the usual story of “consumerism run amok,” are there more logical explanations?

I thought about this for some time and I came to a handful of hypotheses. Tell me which one is right.

Selective Memory

We only observed where others spent more than we do but they are not the same people each time. People who took helicopter rides didn’t also book the more expensive hotel and buy an iPad for each member of their family and buy a $7,000 wedding dress and buy an $10,000 engagement ring. We don’t see where they are spending less.

I’m not a model for frugality. I’m sure they would see me waste money on something they don’t. We just choose to spend on different things.

Income vs. Discretionary Income

Income and discretionary income are not the same thing. A large percentage of our income goes to taxes, housing, and savings for retirement. Retirees living in a paid-off home have very little of those expenses. They don’t need as much income to have more money to spend whereas our income after taxes, housing and savings for retirement can be much less than the topline number. When you measure discretionary income, we really have less.

Less Savings, More Credit

Along the same lines, if others aren’t retired living in a paid-off home yet, taxes, housing, and savings for retirement can still equalize the discretionary income quite a bit. If others don’t save as much for retirement, they will have more money to spend. If they use credit, they will have more money to spend.

Do you have similar experience? What else do you think explains this phenomenon?

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  1. Sameer says

    I think maybe your experience might be due to a combination of the hypothesis you have outlined above. Not necessarily just one explanation.

    However why not go to the actual income distribution tables and see how many households have a higher annual income. There is a log chart at this link which makes it relatively easy to figure that out.

    Data are worth alot especially when you are trying to put your experiences into context.

  2. KD says

    It is all relative. You looked for or became aware of this spending in places where that was the norm. If looked at places in Appalachia or Southern plains, you would say you are very fortunate. Economics of a place like NYC is markedly different than say, Tulsa, Okla. and so are the priorities and the discretionary spending.

    I don’t spend on iPads or helicopter rides, but I do spend it on trips to Turkey and India. So yes, different priorities and different spending profiles. Two biggest items on my paycheck are my taxes and my retirement savings.

  3. MoneyCone says

    I go through this all the time! I don’t know if the other guy is truly wealthy or just living off credit. I can’t judge, but I know my comfort level.

    I can never surf on an iPad on borrowed money. (I do have an iPad btw!)

  4. Stu says

    I bet you have no debt outside of your mortgage. I bet those people taking the helicopter tours and using iPads will be eating cat food during retirement.

  5. J says

    For me, it’s not iPads and helicopter rides. It’s home ownership and children.

    My co-workers and I work in a Southern California industry that runs mostly on freelancers. Although the pay can sometimes be good, the industry offers no steady income. We move from project to project, and the projects last anywhere from two weeks to two years. The unpaid breaks between projects last anywhere between a weekend to a year. Few companies offer insurance or 401(k) benefits.

    Despite the job insecurity, many of my co-workers have kids and mortgages.

    I hope they make more than I do, but I suspect they don’t. Their kids and mortgages most likely come at the cost of their retirement savings.

  6. Helixso says

    I’d add that you’re looking at very conspicuous examples of consumption in small segments of the general population. And media is almost never very good at being representative.

    If someone didn’t think a wedding was all that important, would they go on Say Yes to the Dress? And would Say Yes to the Dress have someone on who only wanted to spend $500 on their dress? In the same way, it would be strange to ask about insuring a $250 ring. The $10,000 ring could also be a heirloom that’s valuable, but wasn’t costly for him.

    It also seems like airplane passengers aren’t a great representation of the population either. Childless adults and frequent fliers are much more likely to take up seats on the plane than families or people without a lot of discretionary income. These are people more likely to have gadgets like the iPad.

    I also think that most people have different priorities than you. The vast majority have either no money saved for retirement or an amount far inadequate of what they’d need to keep them in their present lifestyle. I think that most people would envy your savings, but also consider you slightly odd for being so frugal.

  7. BIGSeth says

    I really liked the first half of this article! As for the hypotheses, I think there’s some truth in all of them.

    Some points:

    1. People do spend money differently – that helicopeter ride may have been there big treat for camping out instead of being in a hotel
    2. Some people simply spend more than they have
    3. Yes, these are likely different people spending money as it matters to them (see point 1)
    4. These MAY all be the same people. What are the odds that the guy with the 10k ring can also float the dress and the ride and the iPad? Pretty good actually.
    5. Some people simply make more than others
    6. You’re not seeing the people that didn’t but the ring, only the one that did. Check engagement rings on Amazon and sort by popularity.

  8. Random Poster says

    As to the helicopter rides, wedding dresses, and engagement ring examples, I think that people tend to spend more on (what they perceive to be) one-time, remember-forever expenses.

    As to the marginally more expensive hotel room and iPad examples, I think that people tend to spend money on things that they believe are good values. $35 more a night for the ability to have restful sleep and private conversation (and especially in a vacation spot)? Sign me up. As to the iPad, I can see how some could think it is a good value (lightweight replacement for a laptop; all-in-one multi-tasking tool; etc.).

  9. Investor Junkie says

    Eh it’s all relative. Someone always makes more (not just a posers living on debt) than you. I would be willing to bet if you look at your income distribution by the IRS you are in the top 10%. What you are describing is really a consumption/income issue than net worth phenomenon.

  10. nickel says

    Stu: I have an iPad and most definitely won’t be eating cat food in retirement. We’ve also paid off our mortgage. Then again, I’ve never been on a helicopter ride… 😉

  11. Leigh says

    On a recent flight, a family of four near me had multiple iPads AND an Android tablet in addition to taking multiple expensive vacations per year, with a kid who was still in diapers. That really made me wonder if they had money or they were just looking like they had money.

    Another person I sat next to on a flight owns a condo or a house in four states and is now living in none of them in yet another state. Same question: is he just spending money or does he actually have money?

    You can never really know, can you? Everyone has their priorities though and perhaps he was wondering where *I* had the money to go on a fancy vacation with my Kindle at my young-looking age.

  12. rich says

    I get the same feeling everytime i listen to the financial talk shows such as Bob Brinker or Dave Ramsey. How is it that these callers all have six figure incomes and millions saved and yet often dont know the difference between bonds, stocks or market risk. Are we to believe these wealthy callers wait around for hours to talk over the radio for 2 minutes? I’ve concluded they are “staged” or bogus calls or dont have all the money they say they have.

  13. Random Poster says

    In these confusing times, I have felt OK to ramp up consumption, although my family has delayed these last two decades. I was a disciple of the save and invest mantra, but it’s easier to do when equities and debt are competing for capital – not so much these days. I have Boomer parents that travel the globe at will, we have done well in the 90’s with double income no kids (and no outlandish income), and I really am worn out with the idea of keeping my cash under the mattress now when I feel as if I can get really good value for money for a little online research and negotiating effort. Maybe I am the exception, but investing doesn’t have the long term appeal of buying things I value, so I don’t think younger people consider long term gratification delay is worthwhile. Instant gratification, live for the day, be the first to act – these are the times we live in – and we’re only part of the 99% if it turns out poorly… One of my favorit recent quotes, from ‘Margin Call’ – “If you’re the first out the door, it’s not panicking”. They were talking about their MBS overhang, it can apply to any overvalued asset, which could even include USD if inflation were to pick up… but noone can take away my (iPad, helicopter trip, overpriced hotel stay…)

  14. Rip says

    I shop at a Family Dollar for things like razors, shampoo, soap and laundry detergent every two weeks. The store is right next to a number of low income housing complexes. The cars in the parking lot are beat down and it is a rough area with vagrants.

    What you are doing is selecting a sample set in situations of privilege (e.g. flying, touring). Your points of reference and observation are too much for the affluent.

    Go to a Family Dollar in the hood and you will not feel that way. When I go to the Family Dollar, I feel bad for the moms who scrape together change and wadded up bills to pay for necessities. I stand in line with 8 others and just look at how bad they must be struggling based upon their appearance.

  15. DTSC says

    I think many people are highly leveraged. We always try to live well below our means and spend only 70% of our gross income (saving the rest). Our neighbor always had nicer cars, nicer clothes, nicer furniture, and nicer vacations than we did, even though he is younger and had a job which (I estimate) pay $50K+ less than mine. I never knew how he did it until his company transferred him and he put his house up for sale. In fact, he put it up for a short sale for 90% of what he paid for it. So it appears he did not even have 10% equity in the house…

  16. Ted English says

    Seeing what the Jones have has always been a curse around every “good financially responsible” person’s neck and deals with regularly. I agree with previous posts regarding debt. I used to be in banking (loan business) 25 + years ago and it always amazed me at the debt loads people carried. And that was then. I shudder to think what a month of reviewing check books is like for most people today. Having witnessed how financials were handled back then I remember wondering what our country would come to some day. Now twenty five plus years later and witnessing what is happening to our country, I can see the fruits.

    My wife was always amazed at how our friends and neighbors always seemed to have a nice house, go out to eat every night and at least one and most times two new cars. I always explained it was just credit. What amazed me though was thinking of the $750 to $1200 in monthly car payments they had to pay every month. Back then a car loan was for “only” 4 years. Now it’s not uncommon to see car loans for five to six or even seven years! Just couldn’t imagine how they did it. Then I think about our own lives and realize that as Christians we tithe $1500 per month to God and have two older model cars that have been long since paid for. Priorities. We thank God every day that we’re not “one of the Jones”.

  17. Monevator says

    It’s hard to find a new angle on this extremely well-worn financial topic, but you’ve done it here. 🙂

    Together with your own thoughts and the suggestions in the comments, I’d add you’ve self-selected the population by going to a fairly pricey tourist resort, sitting on a plane, and watching a shopping channel. At that time, most of the population is not at (and many cannot afford) to be at resorts or on planes. Therefore you’ve put yourself among a more wealthy sub-demographic to begin with.

    That amplifies your other factors, of which the fact that you’re not seeing all their spending is the most thought-provoking I think. 🙂

  18. B says

    As the saying goes, “if you spend all the money you make, you’ll never HAVE any”. I think it is funny to look at people’s spending and think they “have” more money — they may “had” more money — or maybe it is just debt as others have suggested. Well into my 40s now, we have always lived within our means and have not increased our standard of living nearly as much as our income increased in the last 15 years. So now, we really can afford our 2 iPads, helicopter rides in NYC, nice hotels, etc.

  19. Nova says

    Don’t forget that being frugal, saving, and making wise decisions with money should set you up to be able to stay in a fancy hotel, take a helicopter ride, and buy expensive jewelry; enjoy the rewards. Don’t always think of it as, “People having more than me” maybe think of it as, “This is what it will look like when I reach my investing/savings goals”.

  20. Ash says

    The examples are those of discretionary spending. Given that it is discretionary spending, the trick is for the product/service provider to appeal to the combo of my self-identity (both appeal to it and communicate it to others) and also showing how it significantly reduces the risk of “penny-wise pound foolish” when touting a more expensive discretionary product/service. The other part is how much you buy into the pitch – each of us buys into some pitch. What we buy into differs from one person to next. So, let’s not judge others who fall for a different pitch too harshly or believe that they make more/less than us.

    Examples of discretionary spending:
    When I spend money on a new car, it is necessary to get the right model to make the right impression on my colleagues, how the extra 5-10% (translates usually to few thousands of dollars on a car purchase) spending saves the environment, improves safety, and convenience.

    When I spend money on wedding, it is necessary to get the right venue, the right dress, the right caterer etc to make sure that my friends and spouse/spouse’s extended family do not think I make less or do not want them to have good time.

    When I go on a helicopter ride, I maximize the fun in a short vacation and minimize the chances of being disappointed later when a friend shows the video of Grand Canyon or lava flows they took from the helicopter. The rationalization is, $800 for 4 people is x days’ salary and I am highly unlikely to do this often/visit the place again.

    When I spend more money on a hotel room, I am trying to maximize the changes of getting a good night’s rest and make my vacation a fun experience through other amenities/services that a good hotel offers. How far we go depends on what we value.

    How do we figure out that the extra money spent is really buying us better product/service? For example, certain blind tests have shown that there is hardly any difference between $30/bottle and $100/bottle wine. There is not much, if any performance difference due to 87 octane vs 91 octane gas (same is true for different gasoline brands). Easier to find out and tweak our consumption on repeat purchases. Very hard if something is one time (or highly infrequent) experience good (helicopter ride, hotel room fall in this category). Thanks to formal/informal reviewers of products/services such as tripadvisor, consumer reports, amazon product reviews, we have better chances of making the right choice AFTER deciding we want to spend the money. The question to ask when purchasing is whether the decision is an impulse buy (saw an ad, feel like buying it) or premeditated purchase (possibly saw an ad, looked at the reviews, possibly tried the product/service, it is not going to make a big dent in savings or savings rate).

  21. Kevin says

    My adult children, my almost-adult 17 year old, and my girlfriend, all have much nicer phones than I do. They consider texting and web access via phone a necessity, but I do neither.

    My girlfriend and 2 kids wanted I Pads, so I got them each one as a gift. I won’t buy one for myself, but enjoyed using my girlfriend’s … until I pitched in to buy her a MacBook Air (another gift), which I also now enjoy using (but of course won’t buy one for myself).

    At this stage in life, I’ve finally decided I don’t want to fly coach, so went first class on my last 2 New Year vacations (Mexico and Hawaii). It’s worth it!

    Lifelong frugality and saving has paid off, so I now can enjoy splurging on things as desired, but I retain my overall inclination to frugality.


  22. david says

    All a matter of perspective, I suppose. I rarely take vacations that require staying in a hotels. Based on business trips, I find nice hotels to be amazingly expensive. Fine to stay there when someone else is paying, but I would never pay for them myself. By the same token, I have not gotten on an airplane for vacation in many years. If I cannot get there with a short, inexpensive, drive, I am not going.

    For those who take vacations, some save up all year to pay for them, and are quite frugal otherwise.

    • Elenor says

      Here’s the view I don’t see considered here. My husband and I did go into debt to cruise every year of our 17-year marriage. We intended to continue cruising every year, and we worked to keep our other expenses down to afford it. Michael died suddenly in 2011 (heat-stroke-related heart attack) at age 60 leaving me, a 58-yr-old, out-of-the-workforce for 17 years, not quit able to run his company on my own, devastated widow. As it turned out — I was a ‘kept wife’ — I was also left $52k in credit card debt! Massive struggles and desperation — but I am, finally, 3 years on, pretty stable financially and finally seeing a light at the end of the tunnel that is NOT an oncoming train! (My CC debt is paid down to around $18k, all on several zero-percent cards, all of which will be paid off by the end of the 0% rates. I never missed any payments even when it meant horrific struggles — because I HAD to keep my credit score ‘okay.’)

      Here’s the other side: *IF* we had waited till his retirement to cruise, if we had NOT spent money we did not have on trips we could not entirely afford (albeit, some of the trips were before the several economic crashes — so we paid them off easily) — then I would not have the most joyous and fantastic memories of cruising with my soulmate, and of the fun times and amazing things we saw and did. I’d still have the crushing debt, the frantic struggles to ‘right’ the company and sail on — but I would not have had amazing times with a man I will miss to the end of my days! (I’m 58, there are a LOT of days left!) (Maybe!)

  23. phototristan says

    Something to keep in mind is that many are not as financially smart as us. They practice conspicuous consumption in order to make themselves feel and appear richer but really they may be in the red.

    Books like The Millionaire Next Door tell us time and time again that the average millionaire does not look the part. Think older used cars, a $30. watch, un-fancy clothes, etc.

  24. Andy 808 says

    I work at a mid-large scale company here in the UK. It always amazes me that people seem to be able to go to New York, Toronto, Dubai or Australia or Thailand etc for up tp 3 weeks (especially given the cost of flights nower days). These people are early 20s a lot of the time. I assume that they are either in debt to credit, were born into a relatively rich family or are still living at home. Personally, in the last 8 years, I took the Eurostar to Paris/Brussels for 200 each time, Spain once (paid for by a tax rebate – 250) and Egypt twice (440 the first time to celebrate graduating, and for honeymoon – I didn’t pay). Other than that cheap national travel (staying at relatives etc), as much as I would love to fly to Toronto or New York. It must also be said that there is also a lot of poverty in the UK, and doubtless the States too.

    The UK is very expensive – we spent 5k on our wedding, the average here is 20k. Did that affect our enjoyment or the quality of the day? No. We aren’t in any debt either. I was contemplating a small trip to Berlin, don’t think I can afford that even. Edinburgh it may have to be then (using a friends flat so cheap). I manage to save however – maybe these people don’t. I also see their flashy cars – prob on long term finance. I don’t borrow money and bought my car second hand and outright in good condition with most of the depreciation of the asset gone. I don’t care about appearances/marketing pressure or the “Jones’s” as someone else put it. I also don’t want to look like a skank – I guess it’s a balance! I do have the cheapest phone going tho lol.

    I think you did make an oversight with your theories – some people are born with a good start/parents money in the kitty, others aren’t. I know someone whose Dad paid for him to travel to India and Australia. I know someone who has travelled far many more places uner this same principle. Me? My Dad kept a roof over my head, all though he could afford to send me to these kind of exotic places if he chose. I guess he beleived that takes the incentive of self improvement out up to an extent.

    A relative holidays in Florida several times a year, but I know that was all on credit. Also, the UK property market is so expensive a lot of people just think “$%^ it and spend on nice phones, cars holidays etc to alleviate the feeling of hopelessness. That is probably also a big factor on the heavy drinking weekend culture and violence that spills out onto most UK towns and cities nowerdays (although the goverment would never admit that). I am hoping things will get better some day, and am trying to be prepared. I also couldn’t borrow money to have a new car, I Phone or Guitar – it is against my very nature. A mortgage or degree is different obviously.

    Would be interested to hear your thoughts.


  25. BT says

    Honestly, it sounds like maybe you are just a little too tight fisted with your money. I think that is the explanation. Take the hotel room example, the difference is $35! You went with the cheaper one, and then were surprised when it was of lower quality. You obviously could afford the $120 per night hotel to begin with (since you were willing to switch after ppor experience at the cheap hotel), that means the others staying there don’t necessarily have more money, they just weren’t cheap. Your wife didn’t want an iPad, but you were willing to buy it for her, that means you have the money to buy it!

  26. Maureen says

    I always wondered this too but have some ideas.
    I work with people that get Goverment Assistance and they freely spend on amusement parks, fast food,
    tattoos, fake nails, trips, etc.
    Im always surprised to hear about all the places they go as Im working and cant afford it.
    Also, I know of lots of people who have family money handed down and
    money they got from timely sales of homes. We just arent all so fortunate, or are we? Lol!

  27. Tim says

    You also have to think about how much many of those people give to charity. My family tries to give at least 10%, if not more. Some folks, if they do give at all, give only about 1 or 2% or less. Someone making $80,000 may only give $25 a week or month while someone else making $80,000 may give $500 or more a month. The first person has much more to spend on ipads and such.

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