Spending Mistakes That Will Make You Poor

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 positive thinking, forcing you to focus on what you have, not on what you want.

Spontaneous Spending

Spontaneous spending is driven by four factors:

1. Emotional Highs and Lows – When you feel very optimistic about the future, you will engage in Spontaneous Spending. You assume the future will be brighter, higher income, more sales, etc., you can fall into the trap of Spontaneously Spending your income, eschewing it for savings. Express gratitude every day for the good things you have in your life. This shifts your thinking from negative to positive.
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, the emotional center of the brain, takes control and directs your behavior. When your emotional center is in control, you make bad decisions, spending being one of them. This is why the supermarkets place products at the checkout lines – they know that you have depleted your Willpower Reserves, and are suffering from Decision Fatigue. The remedy is to wait until your Willpower Reserves are restored. In other words, “sleep on it”. A nap or eating a light snack will also restore Willpower Reserve.
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. 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.
5. Wait until the effects of the drugs or alcohol to fade, before making any spending decisions.

Lifestyle Creep

When you increase your spending to match your increased income, you are suffering from Lifestyle Creep.

Lifestyle Creep is typically incremental.

You incrementally increase your spending without realizing it.

The remedy is to fix your savings rate.

Example, saving 20% of your income, always.

This acts like 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.

He didn’t have enough money left over from the guaranteed money he received, in order to pay his income tax, and had to use withdraw money from existing wealth.

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.

from Property UpdateProperty Update https://propertyupdate.com.au/spending-mistakes-that-will-make-you-poor/