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Big-spending restraints


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Big-spending restraints

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ONCE A PERSON IS DISPOSED to being a big spender, even when that person is very rich, as some celebrities as, there will likely be financial problems ahead.

That person’s wealth could be eroded by their uncontrolled addiction to buying, particularly by their addiction to acquiring luxury items.

Many items which celebrities own, like two and three homes, yachts and a garage full of exclusive vehicles, are seldom used by the owners. There is not even enough time for the owner to use them all; these grand items are flaunted on friends and colleagues who are invited to use them, many times in the owner’s absence.

Their wealth is tied up in assets which can depreciate in value over time. Usually such assets are not a source of income but rather a source of significant expense.

On the other hand, people who are disposed to saving may gather significant wealth in the long term. We readily acknowledge that the mean person will tend to end up better off, having helped to spend some of the spender’s money. The problem for savers, especially for the extra mean people, is that they may come towards the end of their life with many regrets – about not spending more to reward and pamper themselves and their loved ones.

If you are a big sender, there are three main pointers that you are out of control with your spending: 1) When you buy expensive products or services which you want more than which you need. You may have bought it just to impress your colleagues at work, for example.

2) When you buy expensive products or services that you do not ever use, or just use once or twice.

3) You enjoy the buying adventure and experience more than owning the product or service purchased.

How many valuable or luxury items are in your home that you do not use at all? If you are wealthy enough not to miss the funds tied up in such purchases, that is fine. But real big spenders just keep buying more and more expensive stuff.

The truth of the matter is that if you have diagnosed yourself as a big spender, you first have to recognise that you are dealing with very deep-seated behaviour. It will take significant self-control to counter strong urges. Besides the recommended controls for impulse spending, you will need the support of a coach. Choose a person who is known to be very careful with financial matters to be your adviser and encourager.

The role of the coach will be to encourage the big spender to consider the circumstances of his future retirement or just the loss of income for a period, and to bring attention to the need to provide for dependents’ care or education.

Spending big can be addictive

In dire cases, the big spender will best be served by a qualified counsellor in personal finance. Even then, some of the movie celebrities and successful sports personalities may still have gone broke. The pleasure of spending big can be severely addictive, and part of the luxury of being extra rich is that you do not need to answer to anybody for how you spend your money.

Unfortunately, income is not necessarily wealth; it depends on how you deal with that income. The saver can save and invest, providing streams of passive income that may serve as the basis of being wealthy – being able to maintain their lifestyle in retirement at the same or better level than when they were working. Being able to perpetuate the continuous flow of passive income at such a level is real wealth.

The big-spending celebrities are likely to earn multimillions of dollars during their heyday. Yet spending big creates a lifestyle that is unsustainable when that income level is reduced or removed completely.

What a support coach or counsellor can do for the big spender is to assist in setting reasonable saving and investing goals. Then the big spender can be supported and encouraged to stick to the agreed plan.

In addition, given the strong urges to spend, the big spender should avoid committing to any unplanned purchase immediately, especially if it is a high-priced product or service. The big spender should spend at least 24 hours mulling it over and weighing it as a need or want. This is when the big spender should rely on his coach or counsellor in making the decision on whether to buy.

Nevertheless, the big spender should be allowed to splurge now and then in order that the buying restraints do not become overwhelming. Yet the spending splurge can be on luxury while avoiding spending a large sum of money. For example, a night out on the town at the best restaurant as against a buying new Mercedes. After all, the actual buying experience is the most important part of the drug for the big spender.

Louise Fairsave is a personal financial management advisor, providing practical advice on money and estate matters. Her advice is general in nature. Readers should seek advice about their specific circumstances. Email [email protected]

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