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The average person spends almost exactly as much as they make as income rises. It's a hedonic treadmill https://en.wikipedia.org/wiki/Hedonic_treadmill https://

The average person spends almost exactly as much as they make as income rises. It's a hedonic treadmill https://en.wikipedia.org/wiki/Hedonic_treadmill https://en.wikipedia.org/wiki/Hedonic_treadmill

bungie4 8y ago
Thanks HN, I didn't realize this phenomena was named. Learn something new everyday. I always just said, expenses rises to meet income, + 25%.
- HenryBemis 8y ago
  ..and the “Rat race” I mentioned on a previous comment above is that exactly perpetual effort to cover that +25% as you very correctly stated of “more expensive lifestyle” that we impose to ourselves.
  - matte_black 8y ago
    As a counter argument, never forget you can be a responsible saver one day, only to be dead and buried the next. If you want to guarantee an expensive lifestyle, it’s best to obtain it as immediately as possible.
    - aplummer 8y ago
      Thank god somebody said it. We are in the golden age of cheap travel and leisure, perhaps the golden age of all ages (and certainly of all past). People spend your easy money and enjoy youth IMO.
      - stone-monkey 8y ago
        It doesn't really make sense to say it because it's not as if there's a general cultural tendency towards shrift. Most people aren't saving enough, what's the point in popularizing the message that we should continue on that same course?
        matte_black 8y ago
        Saving never really makes you happy, it makes you feel secure. Seeing a number in an account rise over the years is great, but also a constant reminder of money you’ll never get to touch until you are old and gray, if you even make it that far. And even if you do, what if the world of the future is no longer worth exploring or even living in? Is it more important for people to feel happy, or secure?
        bluGill 8y ago
        Security is a part of happiness. It is finding the right balance. Modern medicine is advancing all the time. You could be old an grey for many years. You could live to be 170. If you live to 170 and save well you could retire at 65 and live the last half of your life with more income from savings to enjoy life than if you work until 170 and spend every penny as you make it. Of course you could also die in the next few minutes. You need to find that balance.
quantdev 8y ago
I don't think the hedonic treadmill or that link has anything to do with your statement "the average person spends almost exactly as they make as income rises." The hedonic treadmill says that happiness is eventually independent of income and savings. So, eventually, whether someone makes $1mm/year, saves none of it, makes $1mm/year, saves $500k, or makes $30k/year, saves none of it, s/he'll have the same happiness. Also, your statement is false. The average higher-income person saves both more money on an absolute basis ($ amount) and on a percent-of-his/her-income basis.
HenryBemis 8y ago
For anyone who hasn’t already, I would strongly suggest that you read/listen the “Rich Dad, Poor Dad”. It speaks of the “Rat Race”, where once you increase your income by a fraction, you almost immediately and subconsciously adjust your needs to absorb that increase. I think this is one of the books that everyone over the age of 15-17 should read as it gives a crash-course on the fine art of making money. This book, together with the minimalists’ work influenced me to change my work style and other habits and now I feel more focused, clutter free, and with significantly more €$£¥ in my pocket.
- pnut 8y ago
  I'm not saying there isn't usable advice in that book, which I have read, but in full disclosure, the book's author, Robert Kiyosaki, fictionalised most of the anecdotes contained within it. Additionally, he operates a real estate "investing" school that advocates and instructs semi-legal, morally questionable predatory practices. It is openly modelled after Trump University, Trump being Kiyosaki's business mentor and aspirational avatar. They have authored at least one book together.
  - SuperNinKenDo 8y ago
    I assume anybody reading that book understands that "Rich Dad" is mostly literary device, probably loosely based on an actual figure(s) and a few key events or experiences. Nobody remembers conversations they had word for word an hour afterward, let alone decades.
  - taneq 8y ago
    > Additionally, he operates a real estate "investing" school that advocates and instructs semi-legal, morally questionable predatory practices. Yeah, it's 90% trivial platitudes about "buy low, sell high" and "invest your money wisely", and then a few pages about how he actually made his money (if that part is true, anyway): Haunt foreclosure auctions to flip the houses. Skeezy.
    - yjftsjthsd-h 8y ago
taneq 8y ago
I'm not sure how much room for hedonic advancement there is when average wage raises are almost exactly equal to inflation.
- adventured 8y ago
  That's not actually what's happening. Drop natural population growth toward zero. Import one million low skill, very low income persons per year. Welcome to the non-merit, non-point based immigration system treadmill of never getting anywhere because you perpetually flood your system with cheap replacement labor. Tens of millions of Americans moved from the middle class into the top two economic tiers since 1970. And we replaced them with vast amounts of low cost imported labor. If you keep doing that, you will not see meaningful wage growth at the median, you'll only see it in the top tiers. Most other developed nations are once again correct: the US should move to a common sense points based immigration system. We could merely exactly copy Canada on immigration, and that would dramatically improve the conditions for workers at or below the median.
  - taneq 8y ago
    Your argument doesn't seem to disagree with mine - I said wages aren't growing, you suggested a (quite plausible) explanation as to why.
oblio 8y ago
I find this is way more prevalent in the US than in Europe.
jimbofisher1 8y ago
Not that I disagree with the idea but do you have evidence that the average person is actually increasing spending every time they get a raise?
- AnimalMuppet 8y ago
  An individual employee may do almost anything. But most of them won't decrease spending when given a raise. Some may spend exactly the same as before. The rest will spend more. Do those who spend more outnumber those who spend less? I have no data, but I would be astonished if those who spent less outweighed those who spent more.
  - jimbofisher1 8y ago
    Sure and I basically agree with that. But saying that the actual Average person is spending nearly 100% of any income gains is a pretty bold claim.
    - AnimalMuppet 8y ago
      That's not a claim that I make, nor one that I think is relevant. What would I do with more income? Well, I'd probably save some of it, use some of it to pay down debt, and spend some of it. I don't have to be spending 100% of my current income for that to be true.
      - jimbofisher1 8y ago
        You must be lost. OP made precisely that claim... >The average person spends almost exactly as much as they make as income rises.

The average person spends almost exactly as much as they make as income rises. It's a hedonic treadmill https://en.wikipedia.org/wiki/Hedonic_treadmill https://en.wikipedia.org/wiki/Hedonic_treadmill

bungie4 8y ago

Thanks HN, I didn't realize this phenomena was named. Learn something new everyday. I always just said, expenses rises to meet income, + 25%.

HenryBemis 8y ago
..and the “Rat race” I mentioned on a previous comment above is that exactly perpetual effort to cover that +25% as you very correctly stated of “more expensive lifestyle” that we impose to ourselves.
- matte_black 8y ago
  As a counter argument, never forget you can be a responsible saver one day, only to be dead and buried the next. If you want to guarantee an expensive lifestyle, it’s best to obtain it as immediately as possible.
  - aplummer 8y ago
    Thank god somebody said it. We are in the golden age of cheap travel and leisure, perhaps the golden age of all ages (and certainly of all past). People spend your easy money and enjoy youth IMO.
    - stone-monkey 8y ago
      It doesn't really make sense to say it because it's not as if there's a general cultural tendency towards shrift. Most people aren't saving enough, what's the point in popularizing the message that we should continue on that same course?
      - matte_black 8y ago
        Saving never really makes you happy, it makes you feel secure. Seeing a number in an account rise over the years is great, but also a constant reminder of money you’ll never get to touch until you are old and gray, if you even make it that far. And even if you do, what if the world of the future is no longer worth exploring or even living in? Is it more important for people to feel happy, or secure?
        bluGill 8y ago
        Security is a part of happiness. It is finding the right balance. Modern medicine is advancing all the time. You could be old an grey for many years. You could live to be 170. If you live to 170 and save well you could retire at 65 and live the last half of your life with more income from savings to enjoy life than if you work until 170 and spend every penny as you make it. Of course you could also die in the next few minutes. You need to find that balance.

quantdev 8y ago

I don't think the hedonic treadmill or that link has anything to do with your statement "the average person spends almost exactly as they make as income rises." The hedonic treadmill says that happiness is eventually independent of income and savings. So, eventually, whether someone makes $1mm/year, saves none of it, makes $1mm/year, saves $500k, or makes $30k/year, saves none of it, s/he'll have the same happiness. Also, your statement is false. The average higher-income person saves both more money on an absolute basis ($ amount) and on a percent-of-his/her-income basis.

HenryBemis 8y ago

For anyone who hasn’t already, I would strongly suggest that you read/listen the “Rich Dad, Poor Dad”. It speaks of the “Rat Race”, where once you increase your income by a fraction, you almost immediately and subconsciously adjust your needs to absorb that increase. I think this is one of the books that everyone over the age of 15-17 should read as it gives a crash-course on the fine art of making money. This book, together with the minimalists’ work influenced me to change my work style and other habits and now I feel more focused, clutter free, and with significantly more €$£¥ in my pocket.

pnut 8y ago
I'm not saying there isn't usable advice in that book, which I have read, but in full disclosure, the book's author, Robert Kiyosaki, fictionalised most of the anecdotes contained within it. Additionally, he operates a real estate "investing" school that advocates and instructs semi-legal, morally questionable predatory practices. It is openly modelled after Trump University, Trump being Kiyosaki's business mentor and aspirational avatar. They have authored at least one book together.
- SuperNinKenDo 8y ago
  I assume anybody reading that book understands that "Rich Dad" is mostly literary device, probably loosely based on an actual figure(s) and a few key events or experiences. Nobody remembers conversations they had word for word an hour afterward, let alone decades.
- taneq 8y ago
  > Additionally, he operates a real estate "investing" school that advocates and instructs semi-legal, morally questionable predatory practices. Yeah, it's 90% trivial platitudes about "buy low, sell high" and "invest your money wisely", and then a few pages about how he actually made his money (if that part is true, anyway): Haunt foreclosure auctions to flip the houses. Skeezy.
  - yjftsjthsd-h 8y ago

taneq 8y ago

I'm not sure how much room for hedonic advancement there is when average wage raises are almost exactly equal to inflation.

adventured 8y ago
That's not actually what's happening. Drop natural population growth toward zero. Import one million low skill, very low income persons per year. Welcome to the non-merit, non-point based immigration system treadmill of never getting anywhere because you perpetually flood your system with cheap replacement labor. Tens of millions of Americans moved from the middle class into the top two economic tiers since 1970. And we replaced them with vast amounts of low cost imported labor. If you keep doing that, you will not see meaningful wage growth at the median, you'll only see it in the top tiers. Most other developed nations are once again correct: the US should move to a common sense points based immigration system. We could merely exactly copy Canada on immigration, and that would dramatically improve the conditions for workers at or below the median.
- taneq 8y ago
  Your argument doesn't seem to disagree with mine - I said wages aren't growing, you suggested a (quite plausible) explanation as to why.

oblio 8y ago

I find this is way more prevalent in the US than in Europe.

jimbofisher1 8y ago

Not that I disagree with the idea but do you have evidence that the average person is actually increasing spending every time they get a raise?

AnimalMuppet 8y ago
An individual employee may do almost anything. But most of them won't decrease spending when given a raise. Some may spend exactly the same as before. The rest will spend more. Do those who spend more outnumber those who spend less? I have no data, but I would be astonished if those who spent less outweighed those who spent more.
- jimbofisher1 8y ago
  Sure and I basically agree with that. But saying that the actual Average person is spending nearly 100% of any income gains is a pretty bold claim.
  - AnimalMuppet 8y ago
    That's not a claim that I make, nor one that I think is relevant. What would I do with more income? Well, I'd probably save some of it, use some of it to pay down debt, and spend some of it. I don't have to be spending 100% of my current income for that to be true.
    - jimbofisher1 8y ago
      You must be lost. OP made precisely that claim... >The average person spends almost exactly as much as they make as income rises.