Why the hell are the majority of people spending every cent they have, oftentimes more than what they have, on shit they don’t need?
At times, I feel like I’m the only sane person left on earth who is actually living within their means, or hell, well below their means by most standards.
Many people like to pat themselves on the back and say “bloody good job” when they manage to put away a paltry 10%* of their take home pay, somehow convincing themselves that the remaining 90% is fair game to spend on crap as they see fit. They tell themselves they’ve earned this right to waste the vast majority of their hard-earned money because they lead a stressful life, and the one week of pleasure they get from using the latest gadget they blew $500 on is far superior to the decades of stress-free freedom they could otherwise have if they just bloody saved more money.
Thankfully, I’ve come to realize I am not entirely alone and there is actually a fairly large community of people who think like me, though it’s rare I ever meet them in person. Every time people like us spend money, it’s a painful battle between the heart and the mind. I can’t even buy myself a goddamn t-shirt without fully analyzing whether I need to make this $10 purchase, and usually, I end up backing out because I can’t validate it when I have a wardrobe full of perfectly usable clothing, even if it is mostly 5-10 years old.
So what is it? Why do so few people actually save money at a respectable rate? I think the answer is a combination of things.
1. The whole world is designed for you to spend as much as possible
Everybody knows that advertising is big business. In fact, in 2015 $600 billion was spent on advertising globally. You can’t leave your house without getting slapped in the face with leaflets and billboards encouraging you to spend, spend, spend. Heck, even if you stay home and watch TV, use social media, browse the internet, play games or read books, you’re almost guaranteed to be inundated with adverts demanding you to spend your money on a constant basis.
It’s not just businesses either, it’s governments too. These are all funded by big business who demand their interests are kept at heart. Governments are also judged by their ability to make people spend money, in other words, maintain a strong GDP. When GDP isn’t doing so great, governments reduce interest rates to encourage people to borrow money and, guess what, spend it on shit!
Everywhere you look, everybody wants you to spend your money and it’s pretty much inescapable. So, it’s down to each of us as individuals to have the willpower to stop ourselves, but it’s not so easy for most…
2. People like to think spending money makes them happy
Society has largely become convinced that in order to be happy, they have to spend money. What they don’t realize is that this happiness ultimately fades, and fades fast. This is what’s known as the hedonic treadmill, and I’ll probably write an entire post on this one day as it’s a big factor in why people spend their hard earned dough.
What people don’t realise is they generally maintain a constant level of happiness, regardless of their spending. Happiness might spike when you buy that overpriced Coach purse, but it will soon fall back down to the base level and you won’t be getting that $1,000 back when it does, so tough shit, I hope it was worth it.
This isn’t even restricted to smaller purchases either. Even large ticket purchases like fancy cars and enormous houses quickly become the norm rather than the exception, and people still end up at the same base level of happiness.
3. To “keep up”
Another reason many people think they have to spend money is to keep up with their families and friends. They see people with nice cars, new clothes, the latest technology and their own houses, and they think this is the “normal” way to do things, and if they don’t do it, they’re somehow losing the “race”.
Unfortunately, most people think the race is a sprint rather than a marathon and they don’t have the forethought to look 10-20 years ahead at what life would be like if they didn’t spend all their money on junk just to keep up with everyone else in the here and now. If they did, they would see they could be sat on the beach in Mexico everyday while the rest of society are slaving away well into their 60’s, just to keep working and spending their money on more shit they don’t need.
4. It’s too easy
Credit cards have created a system where people can spend money they don’t even have by pressing a piece of plastic against a machine and waiting for it to beep. Spending money has never been easier because the “system” is designed to encourage people to do it. The easier it is, the more it is done. One study has shown that people who use credit cards tend to spend 12-18% more than those who use cash, simply because of how easy it is. Spending ACTUAL cash is a bit more painful because you actually see and feel the pain of letting go of that crisp $20 bill.
It’s not just credit cards either, debt has never been easier to get a hold of, even for major purchases like cars and homes. While this has benefits for responsible, financially educated people, sadly the majority of society is not this and it generally screws over everyone else.
Pro tip: Stop using credit cards, or any consumer debt for that matter, if you’ve got the willpower of a fat kid in a bakery.
5. Ignorance is Bliss
Many people don’t give two shits about what they’re spending, don’t even look in their bank account and have no clue where their money is going. They might live like this for years before the chicken comes home to roost, but man oh man will it roost when it does. This is probably one of the most dangerous kinds of people because they also generally tick every box as noted above, and get themselves into insurmountable levels of debt in the process. These are the kind of people who typically end up working into their 80’s if the light doesn’t turn on in their head until it’s too late.
So what have we learned overall? Well, the majority of the reasons people spend all their money is looking at them right in the mirror. Yes, society has been designed in a way for you to loosen your grip on the most precious of resources, but nobody is forcing you to do anything. It is entirely within your power to control what you spend.
The good news is, it’s not that hard to change! There are plenty of examples of spendaholics seeing the light and making complete 180’s. The key for many is realizing the true power of money. It’s not to buy shit that gives you temporary highs. It’s to buy time and freedom! As the old saying goes, time is money. All you gotta do is reverse it to realize money is time. The more you have, the less time you need to spend working and more time you have to do whatever you damn well please. Once people realize this they can start implementing ways to reduce their spending, increase their savings and investments and reach financial independence sooner rather than later.
*The average American savings rate is actually 5.7%. MY.GOD!