Money Mistakes People with “Good Salaries” Make that are Keeping Them Broke

We all know that person. The person who has a decent job, decent salary, and by all accounts should be financially well-off. And yet… you hear them say things like, ‘I’m broke.’

Wait, what? What about the vacation you took? What do you mean, you’re “broke”? Hearing this from someone who clearly shouldn’t be broke can be infuriating.

This question has nagged at me: How do people who make good money still find ways to drain their bank accounts?

I mean, there are people who make very modest salaries and somehow save for retirement just fine. Why do people who earn plenty still end up blowing their money away? What exactly are people with good salaries doing to sabotage themselves?

The more I thought about it, it became clear that the old concepts of lifestyle creep barely scraped the surface. In reality, there was something deeper going on. In this article, I’m going to talk about the decision systems that keep people broke, even when they have good money coming in.

Top Money Mistakes Keeping People Broke

1. They Don’t Have a Spend Filter

You know those people who just always seem to have everything they need?

I’m not talking about metaphorically or the minimalists. Rather, I’m talking about the types of people who have no spend filter and simply buy whatever they want, whenever they want.

These are the people who, when Christmas rolls around, will say things like, ‘I buy everything I want.’

If you have no spend filter, you’ll find it easy to hit the bottom of your bank account. This category of people doesn’t pause before buying something they want, they just do it. If they have money in the bank to ‘afford’ the item, they’ll pull the trigger on it, no questions asked (literally).

The problem? Even small purchases add up fast. It can be easy to look back at the month and say, “I wonder where all my money went.” Small purchases can add up to hundreds, even thousands of dollars worth of unintended purchases each month.

A better approach is to wait a designated period of time before making a purchase. Alternatively, setting up “buckets” for money in advance can put guardrails around spending.

But even people who try to be ‘intentional’ with spending still fall into another trap — how they define what they can afford.

2. They Think ‘Afford’ Means “I Have the Money”

Did anyone ever really teach us what it means to ‘afford’ something? Have enough money to pay for it. That’s the definition, And yet, no one seems to talk about what it really means to be able to afford something.

In practice, the whole concept of “affordability” can drive some people to spend more. They think, “I have money in the bank to cover this purchase, therefore I can afford it.” When you have a good-paying job, it’s easier to justify being able to afford something.

Just because your salary could afford the $1000-a-month car payment, doesn’t necessarily mean that you should. Instead of thinking “can I afford this,” a better approach is to frame it as “should I spend my money on this?” You’ll get two different answers.

And even if someone gets this right in theory, their environment can quickly undo it.

3. They Use Other People to Justify Spending

Most people are familiar with the expression “keeping up with the Joneses,” which is essentially the social pressure to ‘keep up’ with your neighbors, friends, or family with possessions, wealth, etc.

Social benchmarking is in the same camp as “keeping up with the Joneses,” but slightly different.

People who have a hard time saving money often look toward peers to justify their spending. If your friends or peers are buying something, that means, by default, you can afford it as well.

As an example, if you have a co-worker who earns more or less the same amount as you, and you see them buy a new purse. Since they bought one, that means you can too. After all, you make the same money.

The problem? You don’t ever really know someone else’s financial situation. Maybe they got birthday money. Maybe they have a rich aunt. Or maybe, they’ve intentionally saved for this purchase for a long time. It’s apples to oranges, even if you earn the same salary.

Social benchmarking has less to do with envy, and more to do with justification. The easy fix? Stop comparing others’ spending to your own. Make decisions based on your income, savings goals, and what you value.

Even when people aren’t influenced by others, they still run into a more subtle problem.

4. They Underestimate What Things Actually Cost

We’re all guilty of this one, to a degree.

I mean, a full kitchen renovation should only cost $20,000, right? Just because we think something should cost a certain amount, and heck – maybe it “should” cost a certain amount. Well, just because we want something to be true doesn’t mean it is.

People who make good money, but find themselves broke, often sorely misjudge how much things cost. This makes it really challenging for them to estimate costs beforehand, but also audit their spending in the past.

This theory was studied by Daniel Kahneman, Amos Tversky, and Dan Lovallo (1979, 2003). This is known as the Planning Fallacy. This essentially states that people routinely underestimate costs, resulting in cost overruns.

People who routinely underestimate how much something costs often struggle with saving money. The reason? They can’t anticipate or plan ahead, and ultimately run their bank account into the ground to cover the expenses they did not foresee.

A simple fix is to do the opposite of underestimating costs. Instead, tack on an additional 10 to 15% for every large purchase when budgeting (at minimum). Look, there will always be “surprises” attached to most large expenses. Better to have a buffer than be surprised.

But even if someone estimates costs correctly, there’s a bigger structural issue that can quietly drain their finances.

5. They Lock Themselves Into Expensive Fixed Costs

People who have a hard time saving money often lament that they “don’t spend a lot.” Heck, they may even feel “poor,” because they aren’t going out to those nice dinners, buying nice clothes, or buying the latest technology.

Being frugal with money for day to day purchases only gets you so far. People who make good money, but still end up broke, often front-load key expenses that lock them into spending way too much every month.

Specifically, they’ll willingly spend a disproportionate amount of their income on housing and transportation (their car or cars).

That said, no matter how frugal you are with your money, if you’re spending too much on your car and house payments, the few extra bucks you’re saving at the store barely make a dent against those costs.

By lowering those key controllable, recurring expenses, it becomes easier to budget and actually save money.

The fix? When buying a new car or a new house, don’t push the upper limits of what you can technically afford. For example, the bank will likely give you a loan much higher than what you can comfortably afford.

And when all of that spending is locked in, saving becomes the thing that gets pushed to the end.

6. They Save Last, Not First

One of the biggest mistakes people make is not prioritizing saving money. Instead, saving is viewed as something that occurs after all other expenses, not before.

Most Americans have less than 3 months’ worth of money in their bank account to cover expenses.

Want to save more money? Make it a true priority, not an after thought. Treat it as an “expense,” a non-negotiable, rather than a “nice to have.”

In today’s age of online banking, automating your savings could not be easier. Each month, shift money automatically into your retirement accounts (whether through work or on your own), and then take a chunk of money out for emergency savings, and another chunk out for any savings goals you’re working toward.

Fix your Money System, One Step at a Time

Being bad with money isn’t an inherent character flaw. Most of the time, it’s just a collection of small, repeated decisions that compound over time. Repeated decisions become habits. Habits drive most of what we do without thinking.

And when you have a good salary, those decisions get masked. You can “afford” more, recover faster, and justify things that would be obvious problems at a lower income.

That’s what makes this dangerous.

The difference between someone who builds wealth and someone who stays stuck often has less to do with income, and more to do with the (seemingly) tiny decisions and habits that compound over time.

The good news is those systems aren’t fixed.

Change one or two of them, and the results start to compound in your favor instead.