In today’s world, where social media is so prevalent, it is common to see people flaunting their luxurious lifestyles and possessions. However, what many fail to realize is that there is often a significant difference between the image of wealth that people portray and their actual financial situation.
And many times, people spend recklessly without knowing! People don’t realize but a lot of their expenses are more about showing-off and less about being actual expenses.
Don’t get me wrong. I am not saying that you should not upgrade your lifestyle if you start earning more. You should live up a bit. But not too much. And definitely not to show-off to others as there is no end to that. As they say, stop spending money you don’t have to buy things you don’t need to impress people you don’t like.
But the Show Off Mentality needs to be avoided.
Many people fall into the trap of trying to keep up with the Joneses by portraying an image of wealth that is not necessarily reflective of their financial reality. This can lead to overspending and accumulating debt, which can ultimately lead to financial ruin.
Some of the common ways people try to show off their wealth include:
- Buying luxury cars, clothing, and accessories: Many people feel that owning a high-end car or designer clothing is a symbol of success and wealth. However, these items often come with a hefty price tag and can quickly drain your savings if you keep buying regularly. For the really well-to-do though, things are different. They may not just want to play golf but consider buying a golf course itself as an investment!
- Living in a luxurious home: Owning a large, opulent home can be a status symbol for some, but it can also come with a significant financial burden. Not only do you have to pay for the loan EMIs or rent, but you also have to cover maintenance, utilities, and property taxes.
- Going on extravagant vacations: Traveling to exotic destinations and staying in luxurious resorts can be a dream come true for many people. However, these trips can quickly add up, and if you don’t have a solid financial plan in place, you could end up accumulating debt.
On the other hand, many people who appear to have a more modest lifestyle may actually be in a much better financial situation than those who are constantly showing off their wealth. These individuals may prioritize their spending and focus on building their assets rather than acquiring flashy possessions.
Some ways in which people can build their assets include:
- Paying off debt: Another way to build your assets is to pay off your debt. By eliminating high-interest credit card debt and loans, you free up your income to put towards investments and other financial goals.
- Living below your means: Living below your means does not mean living a deprived lifestyle. It simply means prioritizing your spending and focusing on what is truly important to you. By doing so, you can save more money and put it towards building your assets.
- Saving and investing: One of the most effective ways to build wealth is to save and invest your money wisely. By putting your money into diversified investment portfolios and sticking to a long-term investment strategy, you can grow your wealth over time. In developed markets, sensible investors pick suitable passive investment instruments from ETF holdings database and then invest regularly to accumulate wealth over time. You can also do monthly SIP in equity funds to slowly build wealth via inflation-beating returns given by equity asset class.
One of the most critical aspects of building wealth and achieving financial success is to link your investments to specific financial goals. By doing so, you can stay focused and motivated, and ensure that your investments are aligned with your long-term objectives.
So, it is very important to look at every expense (actual or one to show off) and see whether you can actually afford it.
And even if you feel that you do not have a goal in mind immediately and you just want to save or invest, it is important to try and link your investments to goals. It helps. Goal-based financial planning gives investing a perspective and helps you stay on track. Investors who invest randomly and don’t have goal-tagged-investments find it difficult to handle volatility in the markets.
Another benefit of linking investments to goals is that it prevents us from digressing. If you get some extra money from somewhere but don’t have goals or targets, it’s very easy to digress unless you are really disciplined. On the other hand, if goals are clear, chances are that you will want to use the surplus money to give an extra push to your goal-based savings in order to get closer to the goals. Linking your goals to investments and vice versa, definitely increases the chances of achieving your financial goals.
So, if you have a habit of spending a bit freely if not recklessly, it is high time you get serious about managing money. Because if you don’t get serious about your money you will never have serious money.