Serial Spending Is Financially Pathological. Uncontrolled spending will send your retirement plan to an early grave.
You won’t get rich driving Carzilla. Buying a monster car, and other extravagant spending, won't build wealth. If all you have in retirement is Social Security, you'll probably have to ride Buszilla.
Before you buy something, ask yourself whether it's really worth the money. When you buy something now, you're giving up the ability to spend in the future. Is that sacrifice really worthwhile?
Control Your Spending. Your excuses for not saving won't help when you’re 68. You can't buy the early bird special with an excuse. If you need to spend, spend your money on financial security by saving and investing.
If you have to supersize something, supersize your wealth.
Are you a serial spender? Do you fixate on houses, cars, boats, clothes, RVs, TVs, sound systems, backyard grills that roast oxen, marble topped vanities, Brazilian cherry hardwood floors, granite countertops, overseas vacations, and restaurant meals? Do you compulsively follow the latest fads? Do you feel good about running big charges on credit cards to get larger rebates? Have you used home equity loans to convert your house into shoes, sports cars, DVDs, golf clubs, clothes and buckets of chicken? Do you see your ability to borrow, rather than your income, as the limit of your lifestyle? If so, you’re probably a serial spender.
Do you really think people admire you when you’re driving Cargantua? Or do they just envy you? Remember that envy is the first cousin of dislike. Serial spending is financially pathological. Constantly spending all of your income (and more) means that nothing will be left for retirement. When you’re 67, you can’t regain the home equity you spent five, ten or twenty years ago. You can’t retrieve the salary that was spent before it was earned. You can, and perhaps will, eat dog food.
Don't purchase something simply because you want it and can find some way--using credit cards, a home equity loan or whatever--to buy it. Ask yourself whether it's really worth the money. When you buy something now, you're giving up money that could be spent in the future. That's because, as we have discussed, you have only a finite amount of lifetime income. Is it really worth sacrificing future comfort in order to satisfy material cravings now?
Also, consider the real costs of buying something on credit. If you buy a room-size flat screen TV, and charge it to a credit card on which you make only minimum payments, you could be paying for that TV 30 years from now. Whatever bargain you got at the mall will be long gone by the time you finish paying all the interest charges. Money has value, too. Hold onto some of it.
Think about this when you’re confronted by a huge pile of credit card bills: why do you struggle so hard to be broke? It’s really not that much fun.
Maybe you have a lot of reasons for not saving. But reasons don't build wealth. Save now, to build wealth for retirement.
One way to make it easier to save is to be a smart spender. For advice, go to our next section, Smart Spending.