I Always Tell My Clients to Ignore Common Spending Advice Business Insider

 I Always Tell My Clients to Ignore Common Spending Advice  Business Insider

I Always Tell My Clients to Ignore Common Spending Advice  Business Insider

Telling people to spend less as a way to solve all their financial problems is common advice. And this is usually extremely useless.

Thrift will only lead you away; there are only a certain amount of expenses that you can reduce. Telling someone who is already struggling to survive due to low income to spend even less is counterproductive.

I tell my financial planners clients that controlling their cash flow is a critical component to achieving financial success. Wealth is what you can build on what you don’t spend, and keeping your spending low means it’s easier for you to maintain your lifestyle over time (which means more financial flexibility).

You absolutely must live beyond your means, but spending less is not the best solution. Wealth is harder to build.

Spending less is the first step, but not the only one, to create wealth.
In our client meetings at our financial planning firm, we often discuss the difference between looking rich and really being rich.

Looking rich means that you can have a lot of wealth and wealth. Maybe you have a newly renovated home or a newly rented car in your driveway that gets changed every two years or so. You can rest a lot or maintain expensive hobbies.

But being rich depends more on your balance sheet and the assets it includes.

Wealth is your savings, your investments, your freedom from obligations such as debt, and your financial ability. Perhaps most importantly, wealth is the ability to do what you want, when you want, that is, you are rich when you have the flexibility and financial power at your disposal.

It is easier to look rich. It doesn't require you to manage your cash flow wisely. On the other hand, amassing wealth is difficult and will require you to make careful trade-offs and tough decisions about where you put every dollar you earn.