3 Everyday Purchases That Rich People Rarely Make
Tired of recurring purchases, like daily coffee runs, adding up and taking big bites out of your paycheck? It’s time to embrace a wealth mindset. Wealthy individuals know one of the best ways to build wealth is to give every dollar a job rather than waste money on popular spending traps.
We spoke to three financial professionals who manage wealthy clients about the everyday items rich people steer clear of buying and why. Consider how much more you stand to gain financially the next time you’re mulling over whether to make these purchases.
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New Phones and Electronics
It is not uncommon for people upgrade their smartphones and laptops the moment new models are released from manufacturers.
The biggest flaw with this type of spending is that new models debut frequently. IGN reported 27 different generations of iPhones have been released since 2007. If you actually bought every single one, you spent thousands of dollars just to keep up.
Steve Min, chief credit officer at Credit One Bank, said unless there’s a major issue where the smartphone or laptop needs to be replaced, wealthy individuals will continue conducting software updates and relying on their existing electronics. According to Min, financially successful people avoid expenses that do not come with long-lasting returns on the value they provide for your life.
Lottery Tickets
Lottery tickets appear to be harmless enough splurges. They’re cheap (you can usually find scratch-offs for as little as $1) and silly enough to make good stocking stuffers during the holidays. But if you take the lottery seriously, you’re more likely to regularly drop serious coin on lotto tickets in the hopes it pays out with big winnings.
Beth Stenz, financial advisor at Edward Jones, said buying a weekly lottery or Powerball ticket costs anywhere from $5 to $20 a week. If someone spends $10 on lottery tickets every week, they will have spent $520 a year on lottery tickets alone. Do this for 30 years, and you’ll spend more than $15,000 on (mostly) losing tickets.
Because they understand the power of compounding interest, Stenz said the wealthy, particularly the ultra-wealthy, aren’t buying lottery tickets.
Coffee (But Not Because They’re Cheap)
Few everyday purchases are as controversial as daily coffee runs. If you’re earning a lot less, cutting coffee costs is a fast way to start saving more money. But if you’ve established enough wealth, paid off debt and have saved for retirement, can’t you indulge in the habit again?
According to Achim von Bodman, certified financial planner and senior tax manager at Watter CPA, wealthy people don't skip coffee — they just think about its cost differently.
Take a $6 latte. To someone with a wealth mindset, it isn't really $6. Since income is taxed before it reaches your pocket, you'd need to earn $8–$9 pre-tax just to have $6 left after federal, state and payroll taxes. So instead of asking, "How much does this cost me?" the wealthy ask, "How much do I need to earn to afford this?"
As von Bodman put it, “If you want to spend money [like the wealthy], you should stop thinking about the price of things in terms of the money you take home and start thinking about the price of things, in terms of the money you earn."
Bottom Line
None of this means the wealthy never spend money. They just spend it with intention. Before buying a new phone, a lottery ticket, or a daily latte, they ask a simple question: does this purchase earn its place in my budget? Adopting that same mindset, regardless of your income, is the real first step toward building lasting wealth.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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