Can you really afford that lifestyle?

It’s fantastic to have a great job with a great income. It’s even better when that job comes with perks you could only dream of. I know people whose jobs pay their school fees and give them car, entertainment and phone allowances, and a first-class medical cover.

There are people who also get to travel. They get five-star accommodation, business class air tickets and a healthy per diem that enables them to eat and entertain well. If you receive these benefits, enjoy them while you have them. However, watch that this does not become a lifetime trap.

Sally, a media executive, receives these kinds of benefits. She cannot remember the last time she paid her own phone and cable TV bills or school fees. Her PA sorts these things out, the finance department pays and voila! It is done. A few weekends ago she was invited to a friend’s out-of-town birthday party. She did not like the hotel they were booked into and checked herself into the kind of hotel she has 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 was not work-related, she paid out of her own pocket.

This is not the first time Sally has made these kinds of decisions. She hires luxury vehicles when away from home. She ferries her family first-class when they take holidays and spends copious amounts of money on luxury brands. Sally is trying to keep up with a lifestyle that her employer finances and in the process, she has lost touch with reality.

TEMPORARY LIFESTYLE

The firm Sally works for makes hundreds of millions in profit every year. They can afford the perks they offer their senior staff. Sally, though, does not make hundreds of millions every year. Because of that, she cannot make the same spending decisions her employer makes.

What your employer can afford for you is not necessarily what you can afford for yourself. Instead of seeing that it is the firm that chooses to stay at luxury hotels, Sally thinks 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 send the new person to the same five-star hotel. Should the company’s profits dip, that policy may change and Sally will then find herself in a two-star hotel.

The other problem is that since she is so caught up living the lifestyle of her employer, she is not aggressively investing. She has some savings, shares and even some property, but she has not come close to investing in a way that will maintain this lifestyle she is now accustomed to. If she lost her job today, gone is the lifestyle.

As you enjoy the benefits of your job, look very closely at whom you have started assuming is at same level as you. One of Sally’s friends owns a tomato farm and other business ventures. Every so often they coordinate travel schedules and meet up on holiday. I point out to Sally that she and her friend are not on the same level; her friend finances her own luxury trips off her business. If she decided not to work for three months her investments would secure her lifestyle. Sally can’t say the same.

Many executives compare themselves on the basis of similar lifestyles instead of really looking at the workings of the wealthy lifestyle. The financially intelligent ones know that a salary won’t support this, and neither will company perks.

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 have a salary, what choices are you making to ensure you can sustain this lifestyle? Avoid the trap of living your employers’ lifestyle. Remember, wealth is what works when you are not working.