When you think of spending money, what do you think of? For most people, they think of new phones, fast cars and big houses. For others, spending money means paying bills or trying to balance their checkbook. As you can see, we all have different initial reactions to the thought of spending money and in the same light we all think of spending money in different ways. In fact, most people these days have been conditioned to think that spending money is bad and while this is true in numerous circumstances, it isn’t an iron rule. It’s for this reason that I want to share with you why you should spend your money as fast as you can so that you can develop a better understanding of the power of money properly spent which I promise, once grasped, will have your financial future changing for the better!
Now, you may or may not be aware of this but there are actually two types of spenders. The first, are those who cannot spend fast enough. These are the people that have their next paycheck spent before it even hits their account and as you can imagine, when that money is spent on the wrong things, financial issues are going to arise.
Then, there are the non-spenders. These are people who protect each and every penny they have with their dear life. In short, these people keep their spending to a minimum as their scarcity mindset has told them that if you spend the money you have you may not get more of it.
Now, let me ask you, which of the two types of spenders is it worse to be? I think most people would say that the person who has their check spent before they get it is the more fiscally irresponsible party and I’d agree however I think that the second spender is nearly just as troubled as the first. Let’s break down how both situations are detrimental and then get into the method of spending that will have you taking your finances to the next level!
If you thought that the first spender was the more irresponsible one then you probably hold that stance because you know that one of the quickest ways to ruin your finances is to overspend. There’s a reason why one of the most common pieces of financial advice is to “spend less than you earn” and whenever you’re eagerly awaiting spending every last dime you earn then getting ahead will be tough. In fact, this issue is only further exacerbated by the massive amounts of debt we now have access to in the form of credit cards and mortgage loans.
For instance, if you carried the average American credit card balance of $6,000 at 18% and only paid the minimum $200 payment every month, it would take you 41 months or almost 3.5 years to pay it off. Not to mention besides repaying the initial $6,000, you’d also end up handing over $2,000 in interest payments as well! Needless to say, overspending can and will get you into a lot of financial predicaments.
Therefore, if you thought that the first type of spender who is willing to part with their money in a moment’s notice is the most guilty offender, then yes, you are probably right. However, what may surprise you is just how detrimental not spending any money at all can be as well. If you were given any financial advice growing up, it was probably to save your money. This is the common parental wisdom most of us receive and to some degree this advice works. As we just went over, it’s pretty hard to get ahead when every dollar you make is being spent on consumer goods or is being sent directly to your creditors. Unfortunately though, there is a darkside to being tight with your money which is why Mom and Dad may not have been the best people to have gotten your financial advice from.
You see, those who maintain a scarcity mindset that has been moulded by receiving the constant advice to “save your money” are actually not doing themselves as much of a favor by saving as they think they are. To put it bluntly, no one gets rich saving money. Actually, this isn’t true. There are some people who exclusively save but those who take this approach to wealth accumulation require having massive annual income for this strategy to work. However, for the rest of us, saving is a one-way ticket to financial mediocrity.
Don’t believe me? Let me share with you an example to demonstrate why this is the case. Let’s say that you make $100,000 a year which is already an income that most people never achieve. After taxes and expenses, you end up saving $20,000. You save this $20,000 a year for the next 50 years and what do you end up with? $1 million. You’re rich right? Not quite. One factor in this wealth accumulation path that must be factored in is inflation. If we assume a 2.5% inflation rate, that money won’t even be worth $300,000 in 50 years time and I think it’s fair to say that while that is a lot of money, it definitely doesn’t make you someone you would consider as being rich. Therefore, while stashing money in the bank is far better than recklessly spending it, it is still not the reliable path to wealth that most people believe it is.
At this point, you’re probably wondering what the hell you’re supposed to do with your money. You’re not supposed to spend it all nor are you supposed to keep it all. Well, as you’ve probably heard before, life is about balance. Yes, from time to time it is okay to spend a bit of money on those material goods you want. Moreover, yes you absolutely should be setting aside money into an emergency fund and having some extra cash available to cover bills and the like. However, beyond these financial outlays, your money should have one sole purpose. What is that purpose? To go out and make you more money.
You see, what separates the rich and the poor is how they view and use the money that they have. Generally, those with little money to spare develop a scarcity mindset. They worry that if they spend the money they presently have they may not come into more of it. As such, they view parting with their money, even if that money could make them more money, as being extremely risky.
On the other hand, those who can make money at will or who possess the risk tolerance to put their money on the line are those who typically possess an abundance mindset. They understand that you have to take on risk to see reward and that by deploying their money in fiscally responsible ways they should be able to make the financial strides forward that they desire.
This is why I believe that once you have your emergency fund set up and have some extra cash for routine expenses, you should be spending every last penny you have. When I say this, people are usually taken back because I’ve always been a rather frugal person, however many years ago I came to realize the futility of trying to save my way to wealth. Year after year of wishing and praying for a raise at work and being constantly disappointed, it hit me that even with my ironclad savings habits in place, the current path I was on was never going to make me wealthy.
Now, this notion that your current financial path probably won’t make you wealthy may or may not be surprising to you depending on your age and level of financial awareness. However, I think at some point, we all start to have our eyes opened to the limitations of the financial constructs we find ourselves in and then we are presented with a choice. We can either accept our path and accept mediocrity or we can choose to change course and take the steps necessary to radically improve our financial position and get out of life what we truly deserve. If you’re in that second group then let me share with you four ways you need to be spending your money if you want to make significant strides in your financial life!
The first thing you should be spending money on is your financial education. Now, no I am not telling you to go get a finance degree because if I can tell you anything with certainty it’s that a business degree does not equate to gaining practical financial management skills. With that being said, raising your financial awareness is going to be incredibly important in achieving all of your financial goals and here’s why. First, having financial awareness opens you up to new opportunities and ideas. For instance, the notion that saving every penny you have probably seemed like a wise idea until I told you otherwise. In short, by pursuing more information via my content, you’ve gained a better understanding of how money works and how you can use it to get close to your ultimate financial goals. These same financial strides can come in the form of learning new ways to invest or how to negotiate a higher salary with your employer. In short, knowledge is power and when it comes to money, you want all the power in your hands.
The second way you need to spend is to acquire monetizable skills. For the uninitiated, a monetizable skill is any skill you can use to make $1,000 a month or more outside your 9–5 job. Examples of monetizable skills can include graphic design, coding, website creation and the list goes on. Having a skill you can use to make money with is important for two primary reasons. First, knowing you can make money outside your job will undoubtedly heighten your financial confidence. You’ll know that even if you were to lose your job, your income wouldn’t come to a screeching halt and this is a great power to possess. Secondly, having a monetizable skill will allow you to access income that relying solely on your 9–5 would never be able to provide. Once you have this cash, your options for expanding your wealth become endless and having this cash is particularly important for the next way you should be spending your money!
The third way to spend your money is to invest it. At this point, you’ve already invested your disposable income into yourself via financial education and new monetizable skills; however now it’s time to direct that money outward. If you ask me, the simplest and most reliable method of investing is to set up weekly automated contributions into your index fund of choice. This is how I invest and while I have a wealth of knowledge in numerous individual stocks, this method of investing has been the most fruitful given it’s low time investment and overall returns. Therefore, send out your money army to fight the stock market battle for you and when you select the right funds to deploy them into I promise they won’t come back empty handed.
Now, if you’ve formed the habit of continually investing in your financial education and the stock market and now have a monetizable skill that is making you money each and every month then it’s time to move onto the final piece of the spending pie. What is this fourth possible destination for your money? A scalable business. You see, at this point, you should have the financial awareness to understand two important limitations on your wealth accumulation journey.
The first, is the limitation of trading time for money. Whether you are working your 9–5 job or are offering up your monetizable skill on the open market, you are always trading hours of the day for money. As such, how much you can make is limited. Moreover, while investing for the long-term is a wise idea, you should have also realized that while it will be cool to have a million dollars at age 70, having it sooner would be better. As such, you need to establish a means of acquiring wealth quicker and a scalable business is the way to do just that.
For me, YouTube was the way that I decided to scale up my income and now my channel makes me over $100,000 a year. This is money I would have never been able to make anywhere else by only working at most 5 hours a week. However, building a business around social media may not be for everyone and fortunately, there are many other scalable businesses you can choose from. Maybe you have expertise that you can form an agency around or have an idea for a product that a ton of people would benefit from. The key here is to harness reach to disseminate as much value as you can and when you do this successfully, making the money you want will be a breeze.
Therefore, as you can see, it’s not saving money that makes someone rich but spending it instead. When spent properly, money can be your greatest wealth generating tool. Therefore, start to spend your disposable income in the four ways I just mentioned and when you do, reaching all of your financial goals will be inevitable!