Principle 15. Do not spend recklessly

MIKE TYSON.

Tyson, the legendary boxer, is believed to have amassed a wealth that exceeds 400 million dollars in his 20 year career. I have watched him on televisions. His fights were furious and fast. Yet at the age of 39, he had 38 million in debt and was declared bankrupt. If you see the list of how he spend his money, you will realise what overspending is all bout.

He spend –

  • $4.5 million to buy cars and motorcycles
  • $3.4 million to buy clothes and accessories
  • $ 1,40,000 was spend to buy two white Bengal tigers
  • $ 1,25,000 for it’s trainer
  • $ 2 million for a bath tub for his wife , Robin givens
  • $ 4,10,000 on a birthday party
  • $ 2,30,000 on cell phones and electronic gadgets
  • $7m8 million on unidentified personal expenses.
  • Employed more than 200 people including bodyguards, chefs, gardeners etc.

Tyson, I admit, knew how to knock down his opponents. When the basics are right, you perform. He knew the basics of boxing. Unfortunately, he has never learned the basics of finance. When someone who doesn’t know the basics of finance trys to manage money, such profligate spending stories are written. Money came in fast in and it went out even faster. With a negative net worth that large, Mike Tyson is easily one of the poorest man alive in this world. The purpose of this is story is not to degrade Mike Tyson in anyway, but to alert you about the dangers of spending more.

WHY SPENDING FEELS SO GOOD?

Why do some people feel good when they spend more or why do some people spend so much when they get money? We have asked few people regarding this and the five common reasons we found are –

  • Instant gratification: They spend because, that gives them an instant pleasure that they were able to buy something expensive. It satisfies their desire to buy.  So, even if they are aware that it’s quite expensive and beyond their budget, still they go out and buy it to get that instant empowerment. Nobody is wiling to wait because they feel that they deserve it, now.
  • Status quo: They want to keep up with their friends and neighbors who live flamboyantly. When you spend to impress others, it naturally goes out of your control.
  • Past life: some spend to compensate the entire struggle they suffered in their past. They might have had a time when they were surrounded by things that they wished to buy, but couldn’t afford. So when they start earning, they try to compensate all that.
  • Easy availability of credit: When credit is available on the spot (like credit card offers) it tempts them to spend.
  • Lack of basics: Lack of understanding about the basics of finance-specially basic concepts such as time value of money, compounding, present value and inflation.

Psychologists say that depression and low self esteem also results in spending more. They say that some people shop more to compensate their feeling of low self esteem and to boost their confidence. Stress relief and trying to overcome the feeling of inadequacy are also cited as reasons for overspending.

That’s our 15th principle in managing money. Spend only half of what you have! If you are spending in order to get that instant pleasure or to compensate for a tough past or to boost your confidence, you certainly need to correct yourself. You might require a personality trainer. If it’s due to lack of basics, these basics lessons are  just meant for you!

You may like these posts:

  1. Principle 10. Have a Monthly budget
  2. Principle 6: Never stretch beyond your limits.
  3. Principle 2.Time value of money

5 Responses to “Principle 15. Do not spend recklessly”

Travon

September 20, 2011 at 2:39 pm

A wonderful job. Super hlepufl information.

Keyon

November 3, 2011 at 11:35 pm

What a joy to find such clear thkining. Thanks for posting!

Ruppins

July 6, 2012 at 1:44 pm

Thanks for your post. Now i am awaked.

J Victor

November 11, 2012 at 3:51 pm

Thank u ,,:)

Manoj K Tulsani

April 22, 2016 at 10:22 pm

Simply Great!!

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