The following is a post by MPFJ staff writer, Derek Sall. Derek is the owner of the blog, LifeAndMyFinances.com, where he teaches people how to get out of debt, save money, and become wealthy.
Do you have any idea how people used to spend their money 40 years ago?
In a time before credit cards were main stream, people used cash to purchase everything. If they did not have the cash in their bank accounts, then they simply could not buy the goods that they wanted.
Our world is much different today. Since credit is so easily accessible, people often see an item that they want in the mall and quickly whip out their credit card to buy it. They don’t need to think about whether they have the cash in their account because they can just borrow the money now and repay it over the next few months or maybe even years. This method of spending has just become a way of life.
The Smart, the Dumb, and the Wealthy Weirdoes
There were basically two types of spenders forty years ago.
There were those that spent their money immediately when they got their paycheck (and never had a savings), and there were those that lived below their means and put a little bit away each week. The weekly spenders were considered to be financially dumb and the savers were considered to be smart.
Today, there are actually three types of spenders. With the option of credit, you actually have 1) the individuals that spend more than they earn (and have a consistent balance on their credit card), then 2) you have the people that keep their spending in check and live paycheck to paycheck (but pay off their credit card each month), a then 3) there are those that actually put money away and invest in their future with their excess cash.
The spenders who rack up credit card debt are considered to be financially dumb by many. The paycheck to paycheck spenders are considered to be smart since they do not depend on credit to survive. And then there are those that put money away and have a plan to grow wealthy with a budget – these people are thought to be crazy (or “wealthy weirdoes” as I referred to them as in the title) because they are taking the exact opposite approach to spending as everyone else. But, these are the individuals that will become ultra-wealthy while everyone else struggles through life.
Delay Gratification and Become Rich
If you care about your future, you want to be a wealthy weirdo.
In our world today though, this is not an easy thing to do. Many people understand that it is wise to pay for items with cash so that you don’t pay the bank interest on your stuff, but this is where the intellect seems to end for most. If you want to be wealthy, then you need to learn how to have thousands of dollars in your account, but not purchase that item that you want so badly even when you do have the cash.
I used to spend money quite frequently. When my savings account hit $5,000, I felt pretty rich and was almost looking for things to buy. Before I knew it, I had a new TV, surround sound, and a new stereo in my car. None of these things were necessary and the only reason I bought them was because I thought they would make me happy. Plus, I had the cash to pay for them, so I wasn’t being unwise with my spending. Wrong, wrong, wrong. Even though I had the cash, I hurt myself financially be making these purchases. I could have invested that $5,000 and earned many thousands of dollars for myself in the future.
Today, I have learned to overcome this spending habit and am on my way to wealth. My mortgage is nearly paid off and I will soon invest in real estate (in addition to the index fund investing I am doing now) to earn an additional thousands of dollars each month. By continuing to reinvest my earnings into future investments, my wealth will soon grow to an amount beyond most individual’s imagination. If you want to be rich, I strongly urge you to delay your gratification, even if you do have the cash!
How about you all? What category of spender do you fall in to? Are you conscious about saving money each month before spending money on gratification?
Share your experiences by commenting below!
***Photo courtesy of https://www.flickr.com/photos/marcygallery/
