Meet Felix and Sonia, two successful professionals in their late 30s. At first glance, their lives are very similar. Both work in big tech, earning around $275,000 annually, with spouses bringing in another $150,000 each.
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But there's a crucial difference between them, one that illustrates what I call the "success trap."
From the outside, Felix epitomizes the conventional image of success – a great career, a beautiful home, and the ability to provide his kids with the best of everything. Sonia’s lifestyle, while more measured than Felix’s, remains enviable by almost anyone’s standards.
Felix and his wife Mackenzie have allowed their lifestyle to expand with their income. Private schools for the kids, a mortgage on a house at the top of their budget, luxury cars, and lavish international vacations have become the norm. They're saving about 15% of their income – enough to stay on track for retirement, but that’s about it.
Sonia and her husband Ben, on the other hand, have been more intentional about their spending and saving habits. They've upgraded some aspects of their life but continue to save about 35% of their income. Their house is nice but not extravagant, and while they enjoy occasional splurges, they're thoughtful about each major expense. While her neighbors and colleagues probably don't realize it, Sonia and Ben are modern "millionaires next door."
Recently, both Felix and Sonia are feeling the itch to scale back at work and spend more time with their families. Here's where the trap reveals itself: Felix feels stuck. His family's lifestyle depends on every penny of his substantial income. Sonia, however, has options. Their higher savings rate and lower fixed expenses give her the flexibility to consider part-time work or even a career change.
This scenario plays out more often than you might think, especially among high achievers. The success trap isn't just about high income – it's about how that income shapes your lifestyle and, ultimately, your choices.
Why does this happen? Often, it's because we're more imitative than we'd like to admit. In his excellent book "Wanting," Luke Burgis explains:
"...most of what we desire is mimetic (mi-met-ik) or imitative, not intrinsic. Humans learn—through imitation—to want the same things other people want, just as they learn how to speak the same language and play by the same cultural rules. Imitation plays a far more pervasive role in our society than anyone had ever openly acknowledged."
Felix, like many successful professionals, fell into this trap by observing peers living luxurious lifestyles and assuming he should do the same.
The consequences of the success trap can be severe. In my practice, I've seen it lead to burnout, a lack of purpose or meaning, boredom, and stagnation. It's the golden handcuffs scenario – successful on paper, but feeling trapped in a lifestyle and career that no longer brings joy.
However, as Sonia's situation demonstrates, there's incredible opportunity on the flip side. High earners have the potential to maintain high savings rates, which can lead to amazing work and lifestyle flexibility down the road, often when it's needed most.
In this post, we'll explore the success trap in depth – what it is, how to recognize if you're in it, and most importantly, how to break free without derailing your financial future. We'll follow Felix and Sonia's journeys, learning from their choices and outcomes.
With the right strategies and mindset, you can unlock those golden handcuffs and create a life that's both financially secure and deeply fulfilling. Let's dive in.
Understanding the Success Trap
The success trap doesn't spring up overnight. It's a gradual process, often so subtle that those caught in it don't realize what's happening until they're already ensnared. At its core, the success trap occurs when people assume they're free to increase spending commensurately with increases in income. This seems reasonable at first glance – after all, isn't that the point of earning more? But this approach can lock in lifestyle expectations that become very difficult to scale back from.
Let's look at how this played out for Felix and his family.
As Felix's income grew, so did his spending. He fell into some of the most common lifestyle inflation pitfalls I see among high earners:
1. Buying too much house: Felix and Mackenzie purchased a home at the top end of what their lender offered them. It's crucial to understand that the amount a lender will offer you and the amount you should actually borrow are often vastly different. Lenders assume your income will remain steady throughout the duration of the loan – an assumption that can lead to financial strain if circumstances change.
2. Private school tuition: With two kids in private school at $30,000 per year each, Felix and Mackenzie committed to a significant ongoing expense. While education is undoubtedly important, the ROI on private schooling can be questionable in many cases.
3. Luxury vehicles: As their income increased, so did the price tags on their cars. What started as an occasional splurge became an expectation.
4. Elevated travel standards: Vacations shifted from budget-friendly to luxury. Nicer accommodations and first-class flights became the norm rather than the exception.
It's important to note that none of these spending areas are inherently bad. The key is to spend generously (within reason) in the areas you truly care about and be frugal in the areas you don't. However, Felix and Mackenzie increased their spending across the board, leaving little room for saving or flexibility.
Psychological factors play a significant role in the success trap. One of the most insidious is the hedonic treadmill. Spending more often leads to a temporary burst of good feelings, but we get used to it very quickly. We reset to baseline and find ourselves chasing the next high. One of the most important – and difficult – skills in personal finance is learning not to move the goalposts.
As previously mentioned, social comparison is another powerful force. Who you surround yourself with matters immensely. Felix and Mackenzie moved to an expensive neighborhood where everyone drives the newest luxury vehicles and sends their kids to expensive schools. In such an environment, it's incredibly difficult to avoid being influenced by others' decisions.
Contrast this with Sonia's approach. She and Ben made a conscious decision to move to a great middle-class neighborhood with high-quality public schools. Their peer group is categorically different, which has a profound impact on their lifestyle choices and spending habits.
The tech industry, where both Felix and Sonia work, can exacerbate these tendencies. High salaries combined with stock options and bonuses can create a culture of conspicuous consumption. The "work hard, play hard" mentality often translates to spending hard as well.
Understanding these mechanisms is the first step in avoiding or escaping the success trap. By recognizing the gradual nature of lifestyle inflation, the psychological factors at play, and the impact of our environment, we can make more conscious choices about how we allocate our resources.
Signs You Might Be in the Success Trap
Recognizing that you're caught in the success trap is the first step towards breaking free. But how can you tell if you're trapped? Let's explore some key indicators, using Felix's situation as an example.
Financial Red Flags
The most obvious signs of the success trap often show up in your financial statements. For Felix, two major red flags are waving:
1. Low Savings Rate: Despite his high income, Felix and his family are only saving about 15% of their earnings. While this might seem adequate at first glance, it's actually on the low end for high-income earners aiming for long-term financial flexibility.
2. Limited Investments Outside of 401(k): Felix's investment portfolio is heavily tilted towards his 401(k). While saving adequately for retirement is important, a lack of accessible investments outside of retirement accounts can limit flexibility and options in the near to medium term.
These financial indicators suggest that Felix's lifestyle has expanded to consume most of his substantial income, leaving little room for building wealth or creating future options.
Emotional and Psychological Signs
The success trap isn't just about numbers – it often manifests in how you feel about your work and lifestyle. Felix might be experiencing:
1. Feeling Stuck or Boxed In: Despite his outward success, Felix may have a nagging feeling of being trapped. He might look at his beautiful home, luxury cars, and private school tuition bills and feel a sense of obligation rather than satisfaction.
2. Resentment Towards Work: As Felix's lifestyle becomes increasingly dependent on his high income, he might start to resent his job. What once felt like a challenging and rewarding career may now feel like a pair of golden handcuffs.
3. Sunday Scaries: The dread of returning to work after the weekend, often referred to as the "Sunday Scaries," can be particularly intense for those caught in the success trap. For Felix, Sunday evenings might be filled with anxiety about the upcoming work week, not because the work itself is unbearable, but because of the pressure to maintain the income that supports his lifestyle.
By comparison, Sonia's life shows signs of avoiding this trap:
1. Higher Savings Rate: Sonia and her family save about 35% of their income, giving them a substantial financial cushion and more options for the future.
2. Non-retirement assets: Beyond maxing out her 401(k), Sonia is also saving substantial amounts in a taxable brokerage account, which is ideal for funding medium-term goals and providing flexibility down the road.
3. Positive Relationship with Work: While Sonia may still have challenging days at work, she's less likely to feel trapped by her job. Her lifestyle isn't completely dependent on maintaining her current income level, which can lead to a healthier relationship with her career.
4. Weekend Enjoyment: Rather than dreading Mondays, Sonia might find herself energized by her work. The Sunday Scaries are less likely to plague her because her work doesn't feel like a trap she can't escape.
Recognizing these signs in your own life is crucial. In Felix's case, understanding that he's caught in the success trap is the first step towards making changes. For Sonia, continuing to be aware of these pitfalls can help her maintain her financial flexibility and life satisfaction.
Strategies for Avoiding or Escaping the Success Trap
Now that we understand what the success trap is and how to recognize it, let's explore some specific tactics for avoiding or escaping it. These strategies have helped many of my clients, including those in high-paying tech jobs like Felix and Sonia, to build wealth and maintain lifestyle flexibility.
1. Save a Significant Portion of Raises and Bonuses
One of the most effective ways to avoid the success trap is to save a substantial portion of any income increases. My rule of thumb is to save at least 50% of all bonuses and raises. The higher the raise or bonus, the more it makes sense to save. Ideally, you don't want to inflate your total spending by more than 10-20% at a time.
Let's look at how this played out for Felix and Sonia:
A few years ago, both received a significant promotion, increasing their salaries from $120,000 to $190,000. Felix's savings went from $12,000/year to $19,000/year, thanks to his 401(k) contributions being set to an automatic 10%. While this might seem like a win, Felix ended up spending the lion's share of his raise, falling deeper into the success trap.
Sonia, on the other hand, took a different approach. She committed to saving 70% of her raise. This strategy allowed her to make some lifestyle upgrades – she replaced her aging vehicle and added an extra family vacation each year – while also starting to generously fund her taxable brokerage account. As a result, Sonia enjoyed some of the perks of her raise while significantly boosting her long-term financial security and flexibility.
2. Track Your Spending
In the business world, expense tracking is considered essential. Yet, many of us overlook this crucial practice in our personal finances. Tracking your spending gives you a clear understanding of where your money is going, and the results can be eye-opening. ("We spent HOW much on dining out last month?!")
The goal here isn't to shame yourself for spending. Rather, it's about ensuring that the amount you're spending aligns with how much you value each category. For Felix and Mackenzie, tracking their expenses would give them the opportunity to cut back in areas that aren't as important to them and redirect that money towards savings or investments.
There are numerous apps and tools available to help with expense tracking. My personal favorite happens to be Tiller, but clients have has success with Rocket Money and Monarch Money as well. The key is to find one that you'll actually use consistently.
3. Get Clear on Your Values
How many people have a clear answer to the question, "What are your core values?" Not many. Yet, getting clear on your values and aligning your spending with them is probably the best budgeting strategy there is.
Take some time to reflect on what truly matters to you. Is it family time? Personal growth? Travel? Community involvement? Once you've identified your core values, look at your spending patterns. Are they aligned? If not, what changes can you make?
At Two Trails, we’ve created a process to help clients get clear on what matters most. If you’re the DIY type, this free Values Assessment can be a great place to start.
Remember, there's no universal "right" way to spend your money. The key is to ensure that your spending reflects your values and priorities, not someone else's expectations or societal norms.
Implementing these strategies can help you avoid or escape the success trap. It's not about deprivation or extreme frugality – it's about intentional spending and saving that aligns with your values and long-term goals. By following these tactics, you can enjoy the fruits of your success while maintaining the flexibility to make life changes when you want or need to.
Conclusion
As we've seen through Felix and Sonia's contrasting experiences, the success trap is a subtle but powerful force that can turn career achievements into constraints. While a high income can provide financial security, it shouldn't come at the cost of your freedom to choose the life you truly want.
Remember these key takeaways:
1. Be aware of lifestyle inflation and its long-term impact on your choices.
2. Save a significant portion (ideally 50% or more) of raises and bonuses.
3. Track your spending to ensure it aligns with your values.
4. Get clear on what truly matters to you and align your financial decisions accordingly.
If you recognize yourself in Felix's situation, don't despair. It's never too late to make changes. Start by implementing one of the strategies we've discussed. Perhaps begin tracking your expenses or commit to saving a larger portion of your next raise. Small steps can lead to significant changes over time.
For those who relate more to Sonia's approach, stay vigilant. The success trap can be tempting, even when you're aware of its existence. Continue to make intentional choices that prioritize your long-term goals and values.
Remember, true financial success isn't just about how much you earn, and it certainly isn’t about how much you spend—it's about the freedom and options your money provides. By avoiding the success trap, you're not just building wealth; you're building a life of purpose, flexibility, and genuine fulfillment.
Every great journey starts with a single step. Take yours today: