You can read any book or self help guide to know there is a huge difference in the actions of those seeking or producing wealth vs those who may just look the part. Everyone is at a different financial level so this multi-series post is not to shame anyone but shed light on how simple behaviors and financial changes can place you on the path to producing wealth for years to come.
As a self proclaimed bargainista and financial coach to others, the habits and actions below are what I have personally experienced or coached people through to forgo financially unfruitful behaviors and embrace wealth producing actions.
1. Purchasing a Vehicle every 2-3 years
Everyone wants to look good while driving. Do you know that cars depreciate up to 20% or more as soon as it is driven off a dealership lot? Let’s assume a $30k vehicle is purchased 4 times over a ten year period. That equates to $6,000 of depreciation per vehicle that you will never get back. Times that by 4 vehicles in the ten year period and literally $24,000 was thrown away prior to inflation! This could have been 3-6 months worth of living expenses stacked away in a savings account or a child’s education fund. Yes, the driver looks good but at what cost? Just because one can afford the monthly payment it, doesn’t mean one should buy it.
Wealth producing individuals focus on purchasing used, reliable cars that they can hold onto for a minimum of seven to ten years.
2. Spending Excessively on the F-word
The F-word. We all love it and it’s usually the main attraction at large events…. Food. During my financial coaching sessions food is typically the financial item spent most on. Sometimes even greater than mortgage payments or rent! If this is you slow it down! Starbucks, Chipotle, Chick-Fil-A… the list of restaurants eager to take your money can go on and on. You have to cap your spending in this area if you really want to push to building wealth.
Save your coins and pack a lunch.
3. Memberships You Don’t Use
Ever signed up for a gym membership to use it nonstop during the first month then the usage fade gradually over the next few months. Internally you know you should cancel it but something inside says “Just keep it in case you decide to go one day.” Wrong! If you haven’t used it in the past 60 days you should just cancel it.
4. Vacations You Can’t Afford
With the rise in vacation deals such as Groupon Getaways, one to two week vacations are heavily discounted making it even more appealing to take that bucket list trip to Indonesia or Dubai. Even if they are heavily discounted the purchase button should not be submitted if you still can’t afford to actually take the trip.
A key indicator that you can’t afford to take the trip is if you have to purchase it on credit.
5. Unnecessary Clothing Purchases
Wealthy people typically don’t want to advertise their wealth. Strategic wealth seeking people spend a small fraction of their income on clothing and tend to buy from consignment and thrift stores. Why? Wealthy people spend their income on costs typically associated with education and experiences. They understand that while maintaining a polished look is important it should not hinder their increasing personal financial position.
Over the years my personal financial stewardship has increased ten fold. My husband and I took a trip we definitely could not afford early in our marriage and I have cycled through various fitness memberships and regimens due to something being wrong with their fitness program. What I learned over the years is that the common denominator in these scenarios was myself. If I was going to drastically improve our finances and shift my mindset on generational wealth I had to make some serious changes. Fast forward 5+ years, we are debt free, big savers and investors and more importantly great stewards of our finances.
Tomorrow I will discuss five financial habits of wealth producing individuals and how you can make small changes toward building wealth for generations to come. Stay tuned!