I was reading a post over at Author Thomas J Stanley's blog of “Stop Acting Rich” fame. He was talking about how the mindsets are so different for people who merely act rich – and those who truly do have a high net worth.
Those who have a “millionaire mindset” are far more often to be found at discounters and and chains like Target and Wal-Mart, only buying things that they truly need or value.
Those who want to play the part of “being rich” are more often found at high end stores, spending money that they don't have so that they can play the part of being affluent.
Shopping For Bargains Until You're Broke
Those who act rich will often justify their high spending by talking about how much money they're saving, and by talking about all the “bargains” that they've gotten.
The problem is, they find so many of these so called bargains that they're spending more than they make.
Stanley talks about one such couple.
In spite of Dave and Linda's high income, they are two paychecks away from insolvency. How can this be possible? Perhaps it has something to do with Linda's collection of nearly 200 pairs of shoes all purchased on sale from a variety of upscale retailers. She insists that she saved thousands and thousands of dollars by buying these sale-priced items. Her husband is also a clothes horse. He has a closet full of suits all purchased at fall sales, winter sales, spring sales. . . . Many people who are Income Statement affluent like this couple are bargain shopping commandos. They are saving themselves so much money on purchases that they are nearly bankrupt!
It not only requires money to take advantage of all these “bargains” it takes time to plan and shop for these super discounts. Last year this couple purchased apparel from more than 30 different sources. Admittedly some of these purchases were made online, but in most cases Dave and/or Linda made a personal visit. They are relentless in searching for new purchasing opportunities.
Contrast this couple's shopping orientation with the millionaire next door types profiled in Stop Acting Rich (see pages 18 and 19). During the year in which they first became millionaires they had 2.45 times [median] the expected level of net worth given their age and income. In a typical year, on average, these millionaires purchased apparel from only 4.7 stores. Those stores which were mentioned by at least 20% of these millionaires include: Costco, Dillard's, “favorite independent store,” J.C. Penney, Kohl's, Macy's, Nordstrom [especially men's shoes], Target, and Wal-Mart.
What are the chances that Dave and Linda can adopt the retail patronage habits of the millionaire next door types profiled?
Changing mindsets and behavior can be harder than you might think. Old habits, and ways of thinking die hard.
So are you engaging in this type of behavior – buying things because of the messages they send – instead of buying things that you actually need? Are you a “bargain shopping commando”?
At this point in my life, my income is lower because I started teaching 10 years ago. I achieved financial freedom when I was 38 years old and now I can follow my passion. Although my income is lower, my expenses are considerably lower too. My children are grown, we downsized 14 years ago and still socking away the max in 403B, IRA and Roth IRA. It is a mindset when it comes to how you spend your money.
While I tend to agree that people spend money they do not have on the things they do not need.
However, life is collection of experiences and even millionaires are saving money for something, unless there has been a childhood trauma.
Sometimes you have to buy clothes, depends industry you are in, you are portrating image. Some of coallgues of mine staying in hotels with gold plated toilets…
Part of image. Every little helps on your road to financial independence.
Saving money by purchasing items on sale is an old retailer gimmick that never seems to die. People get duped into spending money on things they don’t need all in the name of getting a bargain.
You see receipts printing out your “savings” everywhere: the grocery store, membership clubs, etc. When you see these stories it seems so obvious. But the trick works.