Big investors are not always big spenders. They tend to cultivate more careful and measured spending habits. No one ever got rich by wildly spending money. One of the secrets to remaining wealthy is not to blow your wealth on things that don’t increase your wealth. Some of the wealthiest people in the world are also some of the cheapest cheapskates. But don’t judge them too harshly. There is a method to their madness that often whizzes right over the head of people who have been broke all their lives. It is a lot easier to go from rich to broke than it is from broke to rich. The rich are all too aware of that.
One of the reasons the poor stay poor is in many cases, they cannot differentiate between spending and investing. This is more than mere semantics. The poor work for money. The rich have their money work for them. It is not a magic trick. One of the reasons the rich get richer is because they put their money to work the moment it comes into their possession. Everyone can invest. Here is how to know when you are spending rather than investing:
Nothing You Have Appreciates in Value
It is a well established fact that Macs hold their resale value a lot better than Windows PCs. However, they will almost never increase in value unless they were signed by Steve Jobs. You might consider a computer an investment if used to make money. But typically, computers are not investments. They don’t appreciate in value.
You know you are spending if your home is cluttered with things that depreciate rather than appreciate. Instead of looking to pour thousands into more gadgets you don’t need, why not seek out original art for sale? Not only will you be able to add timeless beauty to your home, you will have an asset that traditionally increases in value over time.
As a collector of art, you might have some pieces that have middling value right now. Perhaps you spent a little at a yard sale and got lucky. Here is where you need to be careful not to think like a spender. If you have something of value right now, hang onto it while it gains real value for later. Try to maintain at least one thing that tends to increase in value.
You Buy Expensive Things on Impulse
If you really want to go broke, continue making expensive purchases on impulse rather than taking the time to do some proper research and soul-searching. Good investments aren’t made lightly or quickly. Bad spending happens in the blink of an eye.
Emotional spending is the death of a good budget. You are cold sober when making your budget. But spending can be like a drunken high. At the moment of decision, you can come up with all kinds of reasons why your budget was overly conservative and why you really can afford that thing you suddenly want so much. Investors keep a level head when forking over large amounts of cash.
You Don’t Know Where All Your Money Is Going
Everyone has had that moment near the end of the month when they could have sworn they had more money in the bank than their balance suggests. This happens to some people every month. They blame the spouse, the bank, and even the dog. They are spenders not investors.
An investor knows where every penny is going at all times. They know, or can quickly determine how every investment is doing, which are performing as expected, and which are underperforming. They are not confused about their money even when an investment fails to pay off. And they never blame their spouse for decisions they made in the heat of the moment.
Which type of person are you? Do you have items that tend to increase or decrease in value? Do you make quick decisions on big-ticket items or take the time to get some perspective? Finally, are you confused about where your money is going or do you have a clear picture of your finances? It is never too late to transform yourself from a spender into an investor. Start taking on that investor mindset today.