People who are good with their money are not big spenders. I was really lucky to grow up with this principle. We were taught to never ask for anything because someone else had it. If we really wanted a colouring kit or pen or whatever, then our parents will buy it. So, ‘my friend has X and I want it too’ never worked in our family. What this instilled in me is a minimalistic way of living – way before it became a thing.
You don’t have to be wealthy to be good with money. It is more about creating good habits and sticking with them. There are some purchases that wealthy people don’t make and here are my top five.
#1: They don’t buy houses they can’t afford
A house is an appreciating piece of asset, but you don’t have to go overboard. Luisa and her husband are in their 40s and always knew their priorities. So, they bought a smaller house than their budget allowed which helped them pay down their mortgage in 10 years. It also allowed them to have a travel budget without having to wait to travel after they retired. They knew exactly what they wanted and preferred to spend on experiences rather than a big, lavish house that would have their cash flow tied up in mortgage repayments.
#2: They do not buy brand new cars
Wealthy people (people who have several thousands of dollars in the bank) will be driving a 5-year-old or a 10-year-old car. A car is a depreciating asset and loses value the minute you drive it out of the showroom. Those good with money know that the best value comes from buying good quality ‘used, near new or demo’ cars and keeping the same car for a while. With good maintenance, a car can last a long time.
My advice is that if you really want a new car (in my case a Mini-Cooper) and you know you can afford it, get a loan for 5 years, pay it off, take good care of the car and let it last, like, forever.
#3: And, they don’t lease cars every 2-3 years
When it comes to leasing, it may seem like a great option with lower upfront costs and ongoing repayments. But you will never own a car with a lease. This means you are going to be tempted to keep changing your car regularly. Alternatively, if you bought a car, even with a loan, and maintain it well, the car will last for over 10 years and you will save a lot of money because repayments can usually be made in 5 years; after which your only costs will be fuel and maintenance. (That’s a saving of at least $500 – $800 per month).
#4: They are not buying luxury goods from brand names
You can always own good clothing and furniture and any other item without having to pay an arm and a leg for it. Showing off wealth is no longer the way to signify having wealth. This has always been a motto in my family and so many other wealthy families. You buy good quality clothing, furniture or any other item and make it last.
Instead of material items, many wealthy people nowadays opt to spend money on wellness and fitness routines and education through books, courses and mentors.
#5: They are not buying things on credit
Wealthy people never use credit to purchase material things. They always have the money they need to purchase items or even go on holidays. I see a trend now where people choose to use credit (after pay, zip pay) because it is easier to buy things. What they don’t realise is the impact it has on their credit rating.
Similarly, a credit card is not the best way to purchase if you don’t know how to manage it. Interest that you pay on your credit card is not exactly cheap at 17% – 25% interest being charged. If a wealthy person ever decides to use credit, it is because they either know how to clear the credit card balance every month and/or they want to hold on to cash for a little longer and offset it against their home loan.
You don’t have to earn a million dollars to be wealthy. Know your priorities, choose how you spend your money and you can live a comfortable life.