Wasting money is a bad thing no matter your income. But maintaining financial discipline becomes more difficult as your bank account grows. For example, by the time they've spent two years in retirement, 78% of former NFL players have filed for bankruptcy or are under financial stress, due to joblessness or divorce. Also, up to 70% of people who receive a financial windfall — from winning the lottery, for example — lose that money within several years.
Those stats alone should sober us to the reality of how quickly we can adapt to a lifestyle with more money, and how easily it can slip through our fingers. In the words of a wise rapper: Mo money, mo problems. Here are eight ways people tend to waste their wealth.
Not Focusing on Specific Goals
Whether you acquire a lump sum from the unfortunate death of a loved one or get a new job that pays a lot more, forgetting your money goals is a surefire way to start blowing those newfound funds. Stay focused on your long-term goals no matter how many zeros are on the end of your paycheck.
Write down a list of three to five things that are super important to you. Maybe you love to go see movies in the theater once a week. Or you might feel a strong inner desire to travel internationally. But that short list will help you stay focused on what truly matters to you. Try to cut out excess spending you see happening in areas that aren't part of your priorities list. You can afford anything through diligent saving, but you can't afford everything.
Forsaking DIY Repair Attempts
Calling in a repairman every time something breaks in your home can quickly drain your bank account. And with the abundance of do-it-yourself message boards and YouTube videos, it's easy to at least attempt simpler things on your own.
If your toilet is making weird sounds and doesn't seem to be filling up properly, don't call a plumber! There's probably a three-minute video out there to help you easily and quickly remedy the problem. And you'll keep more of your hard-earned money in your pocket.
Getting Lazy With Your Budget
Relaxing on your budget is an easy way to start spending more than you should — or worse, more than you make. Not having a budget at all could be catastrophic. Consider using a budgeting tool like Mint or even just an old-school spreadsheet. Whatever works best for you to track your spending is great, but you need to actually do it.
Leave extra room in your budget for unexpected emergencies and building up savings, and set aside 30 minutes a week or one night a month to check your spending against it. Consistently blowing past your monthly budgeted amounts is a sign that you're wasting money.
Forgetting to Bump Up Retirement Savings
Every time you get a raise, you should be bumping up your retirement savings. If you are among the roughly 50% of Americans that have access to a 401(k) through work, it's incredibly easy to increase your contribution amount by 1% or 2%. If your raise was a big one, consider upping that contribution even more. Saving more for retirement will, of course, be a boon in the future for you. You'll also no longer have easy access to those funds in your paycheck. It's a good forced method of saving.
Paying Full Price
If you're on this website, chances are that paying full price isn't something you struggle with. But it is one of the ways that rich people waste money. Going into a department store and buying a full-price shirt, dress, or sweater off the rack is another way people throw money down the drain.
Instead, only shop in the sale section; you'll keep a lot more money in your pocket. Consider shopping online and only browsing the sale section of your favorite retailers. Don't even bother looking at full-price items that will just tempt you to spend.
Not Shopping Around
This is similar to paying full price. But now, more than ever, we as consumers hold the power in our hands. Shopping around for the best price has never been easier. If you're looking for a book, you could easily go to Amazon, eBay, and Walmart in seconds to compare pricing.
You can even install a browser add-on, such as InvisibleHand, to do the comparison shopping for you. (Or visit DealNews, ahem.) Not shopping around is just wasteful.
Always Buying New
While you're shopping around, don't forget to consider used options. Amazon has a plethora of third-party sellers on its site that often have used versions of the book, movie, CD, or other item you're looking for at a much lower price. eBay is like an online yard sale, and deals on used products abound. Many older books you are available used for less than half the price of purchasing brand new.
If you need new clothes, don't forget retailers like Plato's Closet. Forsaking the used-goods marketplace in favor of new alternatives is bad for our planet and a terrible use of funds.
Comparing to Others
We live in the Facebook generation, constantly comparing ourselves to others. But real-life comparisons can be even more harmful than social media ones. We might assume our friends have a perfect family life because of their beautiful pictures. However, you don't really know what's happening behind the scenes. Similarly, your best friend might have just bought a new car, but you don't know if they can really afford it. Comparing possessions is a losing game, and you'll end up wasting money trying to keep up with the folks around you.
Don't waste your money keeping up with the Joneses or cluttering up your house with new stuff you'll quickly forget about. If more money finds its way into your life, just remember the examples of the pro athlete and the lottery winner.
Readers, what are the craziest examples you've seen of rich people wasting money? How do you avoid splurging too much in your household? Let us know in the comments below!