Four Spending Mistakes That Will Make You Poor


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Rich or poor, there are four common spending mistakes that sap your wealth. The key to growing and maintaing your wealth is avoiding these spending mistakes.

Want Spending

Want spending is buying what you want, when you want it, without considering the consequences. Want spending is driven by envy, an emotion that is fueled by negative thinking.

The remedy to envy is gratitude. Gratitude is the gateway to a positive mental outlook, shifting your focus from what you want to what you have and from a scarcity mindset to an  abundance mindset.

Spontaneous Spending

Spontaneous spending is driven by four factors:

  1. Emotions – When you feel very optimistic about the future, you could find yourself engaging in Spontaneous Spending. You assume the future will be brighter, that your income will be higher income, that your sales will increase, etc. When you allow emotional highs to influence your thinking, you can fall into the trap of Spontaneously Spending your income, eschewing it for savings. When you feel sad or depressed, spontaneous purchases can act like a temporary salve, lifting you from sadness temporarily. The remedy is to be constantly vigilant regarding your emotions. Be like Spock – control your emotions. This keeps your prefrontal cortex in control of your brain.
  2. Decision Fatigue – Everyone has about 3 hours of Willpower Energy. Willpower Energy is greatest after a good night’s sleep. When willpower is high, your prefrontal cortex is in complete control of your brain. When willpower is low, you lose discipline over your spending. This is why supermarkets place products at the checkout lines. They know that you have depleted your Willpower Reserves, and that you are suffering from Decision Fatigue. Their hope is, in your weakened state, you’ll make a spontaneous purchase. The remedy is to shop immediately upon waking up from a night’s sleep, after taking a nap or after a light meal. These three things restore your willpower reserves.
  3. Inner Circle – If those inside your inner circle suffer from poor spending habits, they will infect you with their habits. You will find yourself emulating their habits and, thus, their behaviors, thinking and emotions. The remedy is to change who is in your inner circle, from spenders to savers.
  4. Impairment – Drugs and alcohol impair your thinking and lead to spending mistakes. Never spend money when you are impaired. The remedy is to wait until the effects of the drugs or alcohol fade, before making any spending decisions.

Lifestyle Creep

When you increase your spending to match your increased income, you are falling victim to Lifestyle Creep. Lifestyle Creep is typically incremental. You incrementally increase your spending, as your income rises, without realizing it. The remedy is to fix your savings rate. Example, saving 20% of your income, always. This acts as a buffer, preventing you from spending too much and keeping you on track with growing your wealth.

Supersizing Your Life

When Connor McGregor fought Mayweather in 2018, he received a $30 million guarantee. Upon receipt of his guaranteed money, he purchased a $17 million yacht. Because he didn’t have enough money left over from the guaranteed money to pay his income taxes, he had to  withdraw money from existing wealth to pay the tax man.

Supersizing Your Life is driven by a sudden significant increase in income or wealth. Example: large bonus, significant raise, inheritance, etc.

The remedy? Same house, same spouse, same car. Refuse to upgrade your life when your income or wealth rises significantly.

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Thomas C. Corley About Thomas C. Corley

Tom Corley is a bestselling author, speaker, and media contributor for Business Insider, CNBC and a few other national media outlets.

His Rich Habits research has been read, viewed or heard by over 50 million people in 25 countries around the world.

Besides being an author, Tom is also a CPA, CFP, holds a master’s degree in taxation and is President of Cerefice and Company, a CPA firm in New Jersey.
Phone Number: 732-382-3800 Ext. 103.
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