Why do I feel poor even though I earn well?

You got the pay rise. Maybe you changed jobs, maybe you finally hit that salary threshold you’d been working toward for years. And for about three weeks, it felt different. Then it didn’t. Now you’re earning more than you ever have, and somehow — bafflingly — you still feel stretched, still feel vaguely anxious, still feel like you’re just about keeping up.

You’re not imagining it. And it’s not a character flaw.

What’s happening has a name, it has a mechanism, and once you understand it, the guilt starts to loosen its grip a little.

Your brain is running you on a treadmill (literally)

In 1971, psychologists Philip Brickman and Donald Campbell introduced a concept they called the hedonic treadmill. The idea is straightforward: humans adapt, relentlessly, to changes in their circumstances. A windfall, a promotion, a nicer flat — each one produces a genuine emotional spike. And then the spike fades. Your brain recalibrates to the new normal, and you’re back to baseline.

This isn’t weakness. This is your nervous system doing exactly what it evolved to do. Sustained euphoria would be biologically costly and operationally useless — your brain needs to return to neutral so it can stay alert to the next problem.

The cruel irony is that the same mechanism applies in reverse. Most people assume earning more will make them feel more secure. But if your lifestyle quietly inflates alongside your income, the feeling of security never actually arrives. The treadmill keeps moving. You keep running.

The problem isn’t what you earn. It’s that your brain adjusts to whatever you earn as if it were always the baseline.

Then comes the creep

Lifestyle creep — sometimes called lifestyle inflation — is the gradual, largely unconscious process by which your spending rises to meet your income. It’s rarely dramatic. It’s a slightly nicer restaurant when you used to do the mid-range one. It’s the gym you joined because you could, not because you planned for it. It’s subscriptions that made sense individually, stacking silently in the background.

Behavioural economists have documented this pattern extensively. The mechanism underneath it connects to something called reference point bias, formalised by Daniel Kahneman and Amos Tversky in Prospect Theory. Your brain doesn’t evaluate your financial situation in absolute terms — it evaluates it relative to a reference point. And crucially, that reference point shifts.

When you earned £28,000, your reference point was £28,000. A restaurant bill that would have felt extravagant then feels unremarkable at £45,000. The number is bigger. The feeling of abundance is identical. Because your reference point moved with you.

This is why high earners can genuinely feel poor. Not because they’re irresponsible. Because the human brain is not built to feel wealthy in absolute terms — it’s built to feel relative to whatever it most recently treated as normal.

Why standard budgeting advice fails here

Most budgeting content will tell you to track your spending, cut the coffees, and do a monthly review. And then you don’t. And you feel worse about yourself. Classic.

Here’s what that advice misses: it treats this as a discipline problem when it’s actually a perception problem.

If your reference point has drifted upward — if your brain has quietly promoted your current lifestyle to “the minimum acceptable standard” — then cutting back doesn’t just feel inconvenient. It feels like loss. And loss, as Kahneman showed, is felt roughly twice as intensely as an equivalent gain. No amount of spreadsheet motivation overcomes that without understanding why you’re feeling what you’re feeling.

The behavioural finance researchers Brad Klontz and Ted Klontz have written extensively on the money scripts — unconscious beliefs about money inherited from childhood experience — that govern financial behaviour. Many women (and men) who earn well but feel perpetually stretched are running on a money script that says security is always one income bracket away. The promotion happens. The script quietly moves the goalposts. Repeat.

This isn’t a budget problem. It’s a belief architecture problem.

What’s also happening socially

Reference point bias doesn’t only come from your own past. It comes from the people around you.

Research by economists Dan Galai and Orly Sade on what’s sometimes called the “ostrich effect” shows that people avoid information that might be uncomfortable — including information about how their spending compares to what they actually have. Meanwhile, social comparison theory (Leon Festinger, 1954) tells us that humans instinctively benchmark themselves against peers. Your colleagues, your friends, your Instagram feed — they all function as reference points.

If everyone in your social circle is earning similarly and spending visibly, your brain interprets matching that spending as neutral. Not extravagant. Normal. The treadmill isn’t just driven by your own past — it’s being paced by the people around you.

This is worth sitting with, not to blame your social circle, but because naming the mechanism gives you choice. Once you see the invisible reference point, you can decide whether you endorse it or not.

Why this hits women differently

Research consistently shows that women face specific compounding pressures here. The gender pay gap means many women spend years earning less, then experience sharper lifestyle adjustment when income rises. There is also documented evidence — including work by behavioural economist Wendy De La Rosa — that when women earn more, they absorb more of the household’s discretionary spending pressure, often invisibly.

Add to that the social expectation to appear put-together — the wardrobe, the events, the social generosity — and the reference point drift accelerates in ways that are genuinely harder to interrupt.

None of which is your fault. All of which is worth understanding.

One small thing to do this week

I’m not going to tell you to overhaul your budget. That advice has already not worked, and there’s a reason for that.

Instead, try this: lower the cost of looking.

Open your last three months of bank statements. Don’t categorise everything. Don’t judge. Just notice the three biggest spending categories you weren’t consciously aware of. Write them down.

That’s it. No action required yet. The goal this week is simply to let the information exist without the shame spiral. You’re gathering data, not sitting an exam.

This matters because one of the core findings in behavioural finance is that avoidance is self-reinforcing — the longer you don’t look, the more threatening looking feels, which makes you avoid it more. The way to interrupt that loop is to reduce the perceived danger of looking, not to force yourself to look and act simultaneously.

One look. No spreadsheet. No commitment. Just data.

Here’s what that usually surfaces: most people find their reference point drift is concentrated in two or three areas, not everywhere. That’s actually good news. It means the problem is more targeted — and more addressable — than the vague anxiety made it feel.

What comes next

Understanding the hedonic treadmill, lifestyle creep, and reference point bias won’t change your bank balance on its own. But it does something that matters more first: it changes the story you’re telling yourself about why you feel this way.

You’re not bad with money. You’re not failing. You’re a human being with a brain that was not designed for modern financial life — and nobody handed you the instruction manual.

The next layer underneath all of this is usually your money beliefs — the deeper, often inherited scripts about what money means, what you deserve, what security actually feels like. Those beliefs are where the reference point drift originates. And they’re worth looking at.

If you’re curious about what yours might be, the Money Beliefs Quiz is a good place to start. It’s short, it’s specific, and it gives you something concrete to work with rather than another thing to feel vaguely guilty about.

— Joel