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10 Ways to Spend Your Way Into Poverty

Successful, wealthy people do not just suddenly become rich and successful. money flowing out of a retro tap

Success is a process that takes place over many years.

There are certain habits that are responsible for the accumulation of wealth over one’s lifetime.

I call them the Rich Habits.

One such Rich Habit is spending less than you make

I call it the living below your means Rich Habit.

Long before most wealthy people become wealthy, they make a habit of living below their means.

The following is a list of ten spending habits that will keep you in the poor house and prevent you from ever achieving financial independence:

  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 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.   
    Wealth Retreat 2017 - Tom Corley

    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.money savings
  7. Spending any money on gambling. If you’re going to gamble it should come out of your entertainment budget.
  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.

Maintaining a spending budget for various categories and getting into the habit of writing down everything you spend will keep you on the right track.

It will also open your eyes for the first time. calculator coin money save debt

You will be shocked to find out how much you spend on certain budget categories.

And that’s a good thing.

Getting control of your spending is not an easy task.

Once it becomes a daily habit, however, it gets much easier.

You will fall into a pattern and a routine that will keep you out of the poor house.

Happy spending.



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About

Tom is a CPA, CFP and heads one of the top financial firms in New Jersey. For 5 years, Tom observed and documented the daily activities of wealthy people and people living in poverty and his research he identified over 200 daily activities that separated the “haves” from the “have nots” which culminated in his #1 bestselling book, Rich Habits – The Daily Success Habits of Wealthy Individuals. Visit the website: www.richhabits.net


'10 Ways to Spend Your Way Into Poverty' have 4 comments

  1. Avatar for Property Update

    July 22, 2015 @ 8:54 am brendon

    It would be great to be spending no more than 25% of net income on housing, however unless you are earning big money or bought your house decades ago this is completely unrealistic.

    Reply

  2. Avatar for Property Update

    July 22, 2015 @ 9:32 am Paul

    It is good to have budgets and defined limits to work to with your finances, but having a percentage that will work for everyone is just not sensible. Multi-millionaires do not require the same percentage of income for food as someone who is on minimum wage. Nor does a single person require the same as for a family.

    Depending on whether you work for you income, or are passively funded, how much you spend on vacations and things like cars can vary widely. Being retired and only going up the shops may only need a Hyundai versus being a builder with a full-size pickup that has to carry loads and haul a trailer (business expense, but still the car you regularly drive) to work sites all over the state as your work dictates.

    I’ve never been able to spend as little as 25% of my income on housing when I have lived in a house I owned – this is a dream figure. Again if you are on big dollars, this may be possible, but for ‘average’ people with families and an ‘average’ house, this number just won’t hold – why do you think both parents go back to work? Someone has to pay the bills to make ends meet.

    in short: have a budget, spend less than you make, fixed ratios don’t work as a blanket rule across the board.

    Reply

  3. Avatar for Property Update

    March 20, 2016 @ 6:42 pm Ron

    Median house price in Melbourne is currently $700k, so let say you saved 20% deposit and borrowed $560k at 4.2% for 30 years. P+I mortgage monthly repayment is $2738 so your monthly after tax household income needs to be $10952 if spend 25% income on housing. So your annual before tax family income needs to be around $200k, so you are really considered poor if you earn less than that.
    Now let’s look at Sydney where house price is $1 million…..

    Reply

  4. Avatar for Property Update

    March 21, 2016 @ 6:18 am Christopher

    …..it’s not how much you earn…it’s how MUCH YOU CAN KEEP…..!!! “Always Live Within Your Means…” basic common sense is often not so common…..

    Reply


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