Financial experts often advise people to cut back and avoid lifestyle inflation, but when you have a substantial income and more disposable funds, what are worthwhile investments and upgrades to make? Here is a list compiled by personal finance expert Nischa Shah.
Nischa believes that upgrading your sleep environment could be one of the most impactful improvements on the list. Considering we spend nearly one-third of our lives in bed, the importance of quality sleep is undeniable.
Research by neuroscientist and sleep expert Matthew Walker suggests that adults need 7 to 9 hours of sleep per day, with less than 6 hours of sleep per night impairing cognitive function equivalent to being legally drunk.
The consequences of inadequate sleep accumulate, and you can’t catch up on missed sleep over the weekend. Long-term sleep deprivation increases the risks of diseases such as cancer, heart disease, diabetes, Alzheimer’s, and mental health disorders.
Walker recommends designing your sleep environment to be like a cave: cool, dark, and quiet. Investing in upgrading your mattress, pillows, comforter, or blackout curtains if they improve your sleep quality is worthwhile.
While the specifics vary based on individual circumstances, the principle remains the same. Once your income is stable, spending money to expedite and ease access to medical services is worth it.
If your employer provides health insurance as a benefit, ensure you are enrolled in the plan and understand its coverage. If you don’t have access to health insurance through work, purchasing private health insurance is essential to ensure prompt and quality treatment when health issues arise.
In many countries, national healthcare systems are overloaded, leading to delays in treatment. When these delays jeopardize your health, using money to eliminate the delay is crucial.
Increasing contributions to your retirement account in many countries can reduce taxes or qualify you for government subsidies. When your income reaches a certain threshold, it’s more beneficial to invest more income into retirement accounts than pay additional income tax/social security/healthcare taxes, lowering taxable income.
One common financial mistake people make after becoming affluent is letting their funds sit idly in accounts without earning returns, which inflation erodes.
Nischa mentions that she has been teaching people about financial management, including index funds, savings accounts, and retirement accounts. She believes this knowledge is something one can learn independently without needing to entrust money to others for management. Therefore, if you have funds sitting in a bank account without investments, it’s time to dedicate some time and effort to learning about financial management.
Fortunately, much information is freely available now, allowing you to acquire basic financial knowledge from the internet without spending a cent.
Nischa shared a personal anecdote about a broken doorknob in her apartment that bothered her for a long time, but she tolerated it until she needed to rent out her apartment. Only then did she fix it along with other issues that she had ignored for months.
She thought to herself, “Why did I wait until I rented the place out to fix it? Isn’t it worth fixing for myself?”
Perhaps many people tend to tolerate discomforting issues in their homes. Since home is everyone’s sanctuary, the quality of your environment directly impacts your daily mood.
Upgrades don’t necessarily require major renovations; consider purchasing new furniture, improving lighting, adding green plants (multiple studies show that greenery can reduce stress and enhance mood), etc. If you work from home, investing in creating a suitable workspace can boost your work efficiency.
One type of financial success that may look great on paper can leave a person feeling hollow. It involves high income, meeting all standards but spending most of one’s time working without knowing what they truly enjoy.
Nischa believes that hobbies are one of the most underestimated investments as people tend to neglect them when busy. A study published in Psychosomatic Medicine showed that individuals regularly engaged in leisure activities exhibited significantly lower levels of depression and negative emotions and higher levels of happiness.
Even disregarding studies, having a completely separate aspect in life independent of work and productivity holds significant meaning. Engaging in activities purely out of pleasure can help you break away from mundane routines. Therefore, once you have some disposable income, investing in hobbies is crucial.
The burden of managing household affairs can affect your work performance. If you have a partner, children, or need to support parents, this psychological burden increases exponentially. Thus, once you have disposable income, spending money to lighten this burden is one of the most direct investments you can make for family life.
For example, hiring a cleaner, ordering meal services on busy work evenings, or having someone tend to the garden can accumulate tasks that not only drain your energy but also strain relationships with your family.
Investing money in minimizing life friction, whether for yourself or loved ones, yields returns. While these returns may be challenging to quantify, they are easily felt.
Nischa mentioned that one of her most significant non-essential expenditures for mental and physical health after becoming financially stable was hiring a personal trainer. She has no regrets about the money spent on this as she knows she wouldn’t prioritize fitness without this accountability mechanism.
Once you establish a fitness routine, it generates compounding effects, impacting various aspects of life. Perhaps for you, upgrading involves subscribing to a quality service that motivates you to exercise or purchasing fitness equipment that inspires you to work out.
Concerning mental health, many people tend to indefinitely postpone upgrades in this area as they don’t provide the immediate gratification that signing up for a gym membership does. However, Nischa believes the returns on investing in mental health are significant.
You may consider therapy, life coaching, or even maintaining a daily journal for internal self-exploration to understand how you make decisions, what drives your behavior, and what lies beneath the surface.
Once you have a certain amount of disposable income, one of the wisest investments is investing in yourself, especially in skills that directly enhance your earning potential.
This doesn’t mean pursuing another degree. In fact, the most valuable enhancements are certifications, technical training, and courses that clearly and directly increase your salary, improve job prospects, or lead to entering a better industry.
Nischa’s guiding principle is that if the skill you invest in can pay off its cost within a year or two, it’s worth it. For instance, courses on artificial intelligence, financial modeling certifications can increase your annual salary by tens of thousands in a short period, making the returns on these investments evident.
However, there is a category of skills often overlooked but worth investing in – those that help you perform better in your current role without necessarily changing job titles, like public speaking, negotiation skills, and management skills. These skills often determine your chances of promotions, salary increments, and gaining recognition.
Nischa’s approach is to ask herself: which skill gap at present is costing her the most or hindering her from reaching the desired income level? Then she spends money to address that gap.
Spending money on yourself, especially on clothing, often brings a sense of guilt, as though it’s wasteful or slightly vain. However, research doesn’t support this view.
A study published in the Journal of Macromarketing on hundreds of middle-aged women in the UK showed that satisfaction with clothing choices is a significant predictor of overall happiness. When you wear well-fitting clothes that boost confidence and improve posture, you feel more assured.
A study in the Journal of Experimental Social Psychology introduced the concept of “enclothed cognition” to describe how the symbolic meaning and actual wearing experience of clothing systematically impact the wearer’s psychological processes. This concept suggests that your attire directly alters your thinking, behaviors, and self-presentation.
Therefore, when you have the means to purchase clothes you genuinely like, go ahead; it doesn’t have to be designer brands, just clothes that make you feel better as you head out in the morning.
These 10 points aren’t luxuries to consider only when everything else is in place, and you’re leading a retired life. Nischa asserts that health, sleep, family, hobbies, etc., are the core of your life. You work hard to earn money, but at a certain point, this money must begin to go where it truly serves your life.