Here Are the 2 Worst Things You Can Do With Your Money If You’re Not Rich
According to a 2025 global wealth report by UBS, almost 24 million millionaires live in America. So if you're not a millionaire yet, you'll want to watch how you spend your money -- because you don't want to prevent yourself from becoming one.
If you're trying to build wealth, you may be tempted to flaunt some of your early success by upgrading your clothing or buying a luxury vehicle. However, these are likely two of the worst things you can do with your money.
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Wealth influencer Fiona Smith stated that people with a net worth of less than $1 million should avoid spending money on expensive cars and flashy clothing.
The message she shared on X read:
"If you have less than $1M:
Don't wear your wealth
Don't drive your wealth
Build the foundation.
Keep growing."
Are these really the two worst things you can do with your money? We asked other experts to give their advice.
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Why You Shouldn't Spend Money on Cars and Clothing
Why should you avoid spending money on cars and clothes when trying to build your net worth up?
You'll Lack The Financial Discipline Needed To Become a Millionaire
If you start trying to show off your wealth before you've reached millionaire status, you may lose the financial discipline required to get there.
"The belief that individuals with a net worth under $1 million shouldn't conspicuously display their wealth through expensive cars or clothing holds merit primarily due to the importance of financial prudence," said Dan Kroytor, the founder of TailoredPay. "Prioritizing essential expenses and investments over luxury items significantly contributes to long-term financial stability and wealth accumulation, whereas gilded luxury or branded items do not."
Delayed Gratification Will Help You Reach Millionaire Status
When you start spending money too soon on trying to look rich, you could deprive your future self of actually becoming rich. You'll want to practice delayed gratification to ensure that you build strong financial habits.
"Simply put, building wealth is about acquiring assets that appreciate in value and limiting the purchase of assets that depreciate in value," said Robert R. Johnson, CFA, professor of finance at Heider College of Business at Creighton University.
Limiting your spending today gives you more money to invest in your future. This future money can help you retire sooner or live your desired lifestyle.
Johnson added, "It's very difficult for many people to imagine their future self and give up that vacation or new car today in lieu of having money to retire in the distant future."
Your Vehicle Will Rapidly Drop in Value
To become a millionaire, you must be diligent about your investments and where you allocate your funds. Spending money on expensive vehicles that depreciate quickly could lead to financial issues.
"According to CNBC, a new car loses roughly 10% of its value the moment you drive it off the lot, and it's often lost about 50% of its original value within three short years of purchase," said Todd Stearn, founder and CEO of The Money Manual. "So, a brand-new car isn't an investment you can expect to get a great return on, to say the least."
Lifestyle Creep Catches Up to You
Lifestyle creep occurs when you constantly increase your spending as your income goes up. This means you're unable to save funds from your raise, and it's difficult to get ahead.
"A common mistake people make is letting their spending increase commensurate with their new salary," remarked Johnson. "For instance, people move into a bigger apartment or buy a more expensive car or home to reward themselves for receiving a raise."
Your Spending Goes Up With a New Vehicle
When you purchase a more expensive or newer automobile, the cost of driving it also increases in the form of higher insurance, maintenance and fuel costs. This ends up eating an even larger portion of your income, leaving you with fewer funds to devote toward assets that appreciate in value.
You Have Less Money To Invest
Every dollar that you spend on clothing and cars that you can't really afford is a dollar that you don't invest. When you don't invest, you hurt your chances of becoming a millionaire in the future.
"When one buys a car, one commits to car payments that will 'crowd out' other investing activities," warned Johnson. "The money that goes to the car payment could have been invested in assets that appreciate in value over time, like stocks and bonds."
How Can You Limit Spending on Cars and Clothing?
The goal is to find ways to build wealth so that you can focus on growing your bank account instead of giving the impression that you're doing well. Here's how you can save money on cars and clothing.
Saving Money on Cars
You don't want to overspend on a vehicle because this could prevent you from building wealth. You can easily find a car on a budget that allows you to get around without breaking the bank.
"You can save a lot by buying a gently used car that's only had one owner for a few years, and it's likely to be reliable for many years to come," said Stearn.
You can find a reliable vehicle that meets your needs as long as you check the Carfax report.
Saving Money on Clothing
Saving money on clothing doesn't mean you can't look presentable or fashionable. The goal is to get creative with your wardrobe so that you don't have to spend a small fortune trying to appear wealthy.
"Spending a little on some high-quality, basic clothing pieces that work in a variety of outfits and stand the test of time isn't necessarily a bad thing," shared Stearn. "That doesn't mean you need to be buying high-end designer pieces. "
Here are a few other ways you can save money on clothing to ensure you don't get carried away:
Look for deals by buying quality clothing out of season.
Try to find bargains on pieces at thrift stores and garage or estate sales in wealthy areas.
Look for deals online from discount retailers.
If you want to build wealth and reach millionaire status, you'll have to make sacrifices by embracing delayed gratification to ensure you get there. As tempting as spending money on a new wardrobe or upgrading your vehicle is, these purchases could hold you back from achieving your financial goals.
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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