“We spend money we don’t have on things we don’t need, to make impressions that don’t matter.” – Tim Jackson.

Americans spent 1.2 trillion dollars on good and services that weren’t needed (dining out, drinks, clothes, games, apps, gadgets, shoes, jewelry, deal websites, daily coffee trips, premium cable, expedited shipping, etc.) With approximately 123 million households, this amounts to roughly $10K/year or $800/month. If you lack conscious financial disciple, you will always struggle with money whether you make $10K or $10M annually. When we speak of financial discipline, we often focus too much on the macro or fixed expenditures that are easier to anticipate and manage (rent, insurance, car note, loans, etc.) However, what hurts us even more are the seemingly insignificant impulse buys that slowly but surely add up and eat away at our potential savings and assets. Speaking of assets, there’s one huge distinction between the rich, the middle class and the poor and that’s in how they spend their money.

The Poor – On paydays, the poor often spend their money on ‘stuff’…mostly things they don’t need to survive. Their houses and cars are overwhelmed with so much ‘stuff’ that there’s absolutely no room anywhere and yet they’re trapped in a cycle of buying more ‘stuff’ (shoes, games, apps, gadgets, jewelries, decorations, you name it.) They simply justify buying all these ‘stuff’ by claiming that they costs so little because they came from flea markets, dollar stores, garage sales, online deals, etc…And over the years, that’s all they’ll ever have…stuff that can never create cash-flow!

The Middle Class – Those in the middle class appear rich, however, they spend their money acquiring liabilities (things they owe…that mostly require monthly payments) such as cars, houses, boats, etc. Although they make 6-7 figure salaries, their monthly expenses often equal or even outweigh their monthly income. This may be another reason why the middle class seem to be dwindling.
The Rich – The rich simply spend their money acquiring assets (assets are things or investments that generate cash-flows) such as stocks, bonds, real estate, education, etc. The cash-flow generated by these assets are then used to acquire more assets and the cycle is simply glorious.

The Rich – The rich simply spend their money acquiring assets (assets are things or investments that generate cash-flows) such as stocks, bonds, real estate, education, etc. The cash-flow generated by these assets are then used to acquire more assets and the cycle is simply glorious.

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