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10 Spending Habits That Will Keep You Poor

One of the principles of wealth is spending less than you earn.

Of course for most Australians it’s the opposite – their money runs out before the month does.saving

Successful, wealthy people – be they property investors, business people or entrepreneurs – don’t just suddenly become rich and successful.

Success is a process that takes place over many years.

First you save, then you invest and over the years grow your asset base, then you move to the cash flow satge and live off your asset base of properties

My good friend and best selling author Tom Corley explains there are certain habits that are responsible for the accumulation of wealth over one’s lifetime.

He calls them Rich Habits (which happens to be the name of his best selling book.)

One Rich Habit is spending less than you earn.

This is also probably what your parents taught you – live below your means.

Corley lists of ten spending habits that will keep you poor house:

  1. Charging ordinary living expenses on a credit card – If you are unable to afford meeting your ordinary living expenses and must resort to the use of a credit card to meet your monthly
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     living expenses, you are by definition, living above your means. Accumulating credit card debt is the third leading cause of bankruptcy, behind a job loss (#2) and medical costs (#1).
  2. Spending more than 25% of your net income on housing costs. Housing costs include rent, mortgage, real estate taxes, utilities, insurance, repairs and maintenance.
  3. Spending more than 15% of your net income on food. This includes groceries and does not include prepared food.Prepared food is part of your entertainment budget.
  4. Spending more than 10% of your net income on entertainment/gifts. This category includes bars, restaurants, movies, music, books, gifts etc.Eating out and any prepared food you purchase is part of your entertainment budget.
  5. Spending more than 5% of your net income on car expenses. Car expenses include a lease, loan, insurance, gas, tolls, registration fees, repairs and maintenance.
  6. Spending more than 5% of your net pay on vacations.
  7. Spending any money on gambling. If you’re going to gamble it should come out of your entertainment budget. my-kids-never-ask-for-money
  8. Going over the top on gift giving. Gifts are part of your entertainment/gift budget.Sticking to your 10% budget will prevent you from going overboard on gift giving.
  9. Spending more than 5% on clothing. More than a few of the wealthy in my study had the Rich Habit of buying the bulk of their clothes at goodwill stores. Many Goodwill stores sell high quality clothing at a deep discount. It may require spending a few more dollars on a tailor, but it’s well worth the additional cost.
  10. Spontaneous spending is never a good idea. You need to take the emotion out of your spending habits.There is always time to plan and shop before your spend your hard earned money.

Clearly many Australians have a spending problem.piggy bank borrow money save parent glasses stern lesson learn

The first step in controlling it is to set up a budget – track all your spending.

You’ll be surprised where your money goes.

The next step is to control your spending – but that’s not always so easy – is it?

However it’s one of the Rich Habits of the wealthy!



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About

Michael is a director of Metropole Property Strategists who help their clients grow, protect and pass on their wealth through independent, unbiased property advice and advocacy. He's once again been voted Australia's leading property investment adviser and his opinions are regularly featured in the media. Visit Metropole.com.au


'10 Spending Habits That Will Keep You Poor' have 5 comments

  1. Avatar for Property Update

    March 3, 2015 @ 10:26 am Lauri

    Thanks so much for the post on Tom Corley’s Rich Habits. It always great to know that people are spreading the word about the importance of good habits. Tom also has another book that is terrific, titled Rich Kids – How to Raise our Children to be Happy and Successful in Life. If you like Rich Habits, chances are you’ll really appreciate Rich Kids.
    Also, Tom has tons of free information on his site http://www.richhabits.net. It’s updated daily and we invite you and your readers to access all the goodies there.
    Thank you once again,
    Lauri Flaquer
    Tom Corley’s Publicist.

    Reply

    • Avatar for Property Update

      March 3, 2015 @ 10:32 am Michael Yardney

      Thanks Lauri

      Yes Tom also has a great blog that I enjoy reading

      Reply

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      February 13, 2016 @ 12:34 pm Robert Kisler

      Love reading these articles daily and all the excellent advice they give and link to but I felt obliged to comment on this one! 25% only on housing expenses? If as a couple you CLEAR say 1200 a week you are meant to pay mortgage, utilities, insurance etc on $300 or less a week?!?! If someone can email me where he lives I will move there Immediately! Haha. Im guessing a country town in the middle of absolutely nowhere. Certainly not ANY decent size city or town in this country that I am aware of! Or he just assumes everyone clears $3000+ a week.

      Reply

      • Avatar for Property Update

        February 13, 2016 @ 2:24 pm Michael Yardney

        Robert
        Thanks for the kind words.
        Of course you’re right – Tom Corley lives in the USA – however in Australia you end up spending more than 30% on housing expenses

        Reply

  2. Avatar for Property Update

    May 15, 2017 @ 2:07 pm BOB mCdOUGALL

    will make a lot of savinga if you CAN afford to only spend 65% of your incomeaS the article suggests

    Reply


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