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  • Ryoga

What Makes You Broke? How to Make Wise Purchasing Decisions

Updated: Dec 22, 2023


A stylishly dressed woman wearing luxury clothing stands with many brand shopping bags in her hands, showcasing her extravagant shopping spree.

In the journey toward success, one may encounter significant financial hurdles. The pathway may even seem blurred when your bank account balance is constantly low. This article is designed to help you comprehend the reasons behind your financial struggles and provide insights to make better purchasing decisions.



The Temptation of Materialism and External Influence: What Made You Want to Buy It?


It's not uncommon to be attracted to luxury cars, designer clothes, or the latest tech gadgets. You might see a celebrity flaunting their wealth on social media or an individual displaying their opulence in the city, and you're instantly drawn in. This desire often emanates from the urge to impress others, but does it make life better? Or is it just an ego boost?


It's essential to consider the purpose of your purchases. Ask yourself, 'Does this item add value to my life?' or 'Will this purchase offer a return on investment?' If the answer is no, you probably don't need it, you just want it. It's vital to discern between need and want and understand that they're distinct.



Affordability: If You Think You Can Afford It, You Can't Afford It


Think about the last time you purchased a bottle of water from a supermarket. Did the price make you hesitate? Did you question, "Can I afford this?" Likely, you made the purchase without hesitation. It didn't impact your lifestyle or future decisions. Compare this to a wealthy individual walking into a car dealership and purchasing a 6-figure car without a second thought - the actions are parallel. True affordability is when you don't think about it.

If you find yourself wrestling with the concept of affordability, then it's likely beyond your means. Affordability comes with conditions and potential repercussions. For instance, if you contemplate buying a boat and find yourself grappling with the financial implications, it's a sign you can't afford it.

You may attempt to rationalize the expense with internal dialogues that often begin with "I can afford this as long as..." such as:

  • I cancel my health insurance

  • I secure that promotion

  • I receive a year-end bonus.

So, how do you know if you can truly afford it? If you can make the purchase in cash, without any changes to your lifestyle or being affected by unexpected 'bumps in the road', then you can afford it. To put it another way, if you buy a boat, pay in cash, and are unfazed by unforeseen financial difficulties, you can afford it.

Would you regret buying a bottle of water if you lost your job the following week? Probably not, as it wouldn't make a significant difference. This is how affordability is measured.



The Risk of Credit Card Debt: Using A Credit Card Even If You Don't Have Money


This is the biggest mistake I made, I used a credit card even though I didn't have money in my bank account. Oftentimes, someone who does this lives paycheck to paycheck. Utilizing a credit card without having sufficient funds in your bank account is a trap many fall into. It leads to a vicious cycle of debt that can be hard to escape. Remember, spending money you don't have is essentially stealing from your future self, and it's a cycle that can continue perpetually if not checked. While credit cards can help build your credit score, they're not a magic solution to financial woes.



Breaking the Cycle of Materialistic Spending: Material Things Often Keep People Spending More Money


The cycle often looks like this:


  1. Work to generate income.

  2. Use income to maintain lifestyle and accrue debt.

  3. A luxurious lifestyle creates the desire for more.

  4. Repeat.

When we have money, we buy anything we ever want. However, it's crucial to reflect on our spending habits. Think about the last time you received a bonus - how did you spend it? If your expenses made your life or your family's life easier or provided enriching experiences, such as travel, or mountain climbing, then it's a worthy investment. However, if your expenditures are influenced by others or merely to impress others, it's necessary to break free from this negative cycle.

Constantly striving to impress others forces you to work longer to earn more, sacrificing your time for instant gratification. Money undoubtedly improves our quality of life, and if you're a millionaire, you can spend as you wish. But the reality is - not everyone is a millionaire, and even millionaires can go bankrupt if they spend more than they earn.



The Value of Money


I Believe real wealth and happiness stem from investing in three fundamental aspects - relationships (family), health (fitness), and freedom (choice).

Something like this:

  • Money can buy the freedom to chase your wildest dreams.

  • Money can buy the freedom to support your family.

  • Money can buy the freedom to enhance your health, affording nutritious food and fitness trainers.

  • Money can buy the freedom to engage in activities you love.

  • Money can buy the freedom to reside in a place you cherish.

  • Money can buy the freedom to learn anything you desire.



The Joy of Experiential Investment


A study conducted by the University Of Colorado At Boulder suggests that investing in experiences brings more happiness than materialistic purchases. This is because experiences foster better social relationships and are a more significant part of one's identity.



Conclusion


While money can enhance the quality of life, the real pitfall lies in spending to impress others, often influenced by societal norms. The key to financial freedom is making wise purchasing decisions based on necessity and value addition rather than indulging in materialistic desires.

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