Common Mistakes when Thinking About Money
- Misconception: Being rich means having and spending a lot of money.
- Misconception: Saving is not worth it.
- Misconception: It’s complicated.
- Misconception: Money is evil.
- Misconception: Buying at a Discount Saves You Money
Philosophically speaking, being rich means having enough money rather than trying to fill up an endless well of whims and desires. The rich spendthrift image is happily promoted by the media and the film industry. It appears to be more fun. As time goes on, this image starts fuelling itself as well: newly rich and famous people with a poor background start treating themselves to long-awaited childhood dreams and showing off to the amazed public how they can spend money on extravagant parties, posh cars, designer clothing, huge mansions, exclusive jewelry, you name it. What the media forget to tell the public is that every item of this kind requires even more money spent on it in the form of necessary accessories and maintenance, which boils down to working more and earning more money just to sustain your chosen lifestyle, or, to quote Fight Club, being possessed by things you possess.
OK, we’ve dealt with spending, now let’s briefly take a look at money itself. This kind of misconception is kind of relative. You don’t want to have a £500,000 note if all it can buy you is a cup of coffee. So the thing is not to have money, the value of which constantly declines as successive governments deliberately debase/inflate the currency to compensate for their economic incompetence, but to have something that has permanent value, that is, to have “assets”.
When all you can save up a month is just a few pounds, it may seem that the whole idea is rubbish and a waste of time. But look at it from the opposite perspective: what if you start getting into debt by a few pounds a month? And then, perhaps, a hundred? And then with some magic interest sprinkled over it?… Which option would you prefer?
The thing is, spending and saving are opposite financial processes that work practically the same way with one big difference: spending brings an immediate reward which lasts until the next purchase, whilst saving is more like a financial diet or workout: you don’t see the results immediately, but people who stick with it, say it works… The proof is all around you in the better lifestyle of the surprisingly many thrifty, industrious and surprisingly wealthy people who are in the early days on no better wages than you are. The truth is, it is as if money is magnetic. If you are below zero, money gets sucked away from you faster and faster the deeper into debt you sink. As soon as you are in positive territory, however, it starts getting sucked towards you instead! Very slowly at first, of course, but eventually, faster and faster. Over time, the difference can be quite dramatic. You just require patience, and the grim tenacity to hang in there, determined to save what you can, almost no matter what. For those of you who like to have a drink each day, consider that one pint of beer a day is wasting you around £1,000, each year. You are literally pissing your future happiness and security away. Similar considerations apply to other unnecessary items like cigarettes, pricy coffee, clothing, gadgets, and so on.
Yeah, the financial world keeps coining new terminology and the media adopt terms like “quantitative easing” the same day, the small print on your bank contract is also full of phrases that seem to have come from a parallel world, but the reality is… on the personal (or household) level, the terms are very simple: earn, spend, save, etc. Practise on apples.
It is as evil as a knife, which can be used to chop a lovely salad or to commit crime.
You only save money buying at a discount if it was something you had to buy anyway. Otherwise, you can save even more money by not buying the item at all! Remember, items are only discounted to encourage you to spend money that you wouldn’t have otherwise. By luck, some will be things you need, but mostly they are a total waste of your hard work in earning that money in the first place. So whenever you see some tasty item that you can live without at a discount, saying maybe, “Save 50%!”, just say to yourself, “I’ll save even more if I don’t buy it at all!”
My wife adds an immediate reward to this by moving at least a portion of the money she has thereby really saved into her long-term savings account (using her mobile phone banking app).
Well, that’s it for the moment. If you have any ideas of your own, please leave a comment using the link at the end of this article. If you don’t believe me, or want some help in persuading yourself of the importance of saving money, you might read the 19th Century classic, Thrift by Samuel Smiles (also available free for Kindle, and on the Gutenberg Project in various formats).