You don’t get rich by spending

You don’t get rich by spending

Last night I finally got round to watching the 2nd part of Britain’s Spending Secrets. I’ve previously spoke about some of the themes of the 1st part of this insightful documentary which went into details on how people prioritised their spending and the infamous ‘middle class’ family who almost starved to death just so their 2 children could go to private school. The 2nd part however focused much more on the amounts people spent rather than specifically what they spent it on.

What surprised me most about the families featured on the program was that regardless of their income; they all seemed to spend around the same 90+% of it every month. While none of them were starving, it was painfully clear that they all enjoyed spending a majority of their monthly incomes on non-essential luxury items and had to continue doing so. It amazed me to see the family making £18k had their house absolutely crammed full of bargain items purchased 2nd hand. To these people it didn’t matter how much they were earning as long as they were still able to go out and spend it all each month either at a designer shop in London or a cold car boot sale in a farmer’s field. They all received the same temporary happiness boost and injection to self-esteem that comes with being the owner of a new product, but they were never going to be rich.. either financially or within themselves.

It was interesting to hear from the low income family who went into depth discussing how frugal they were with overpaying the mortgage and cutting down on expenses so that they would have more money spare for bargain hunting at the weekends. I can’t have been the only one who spotted the deadly earn-to-spend hamster wheel they’re madly running away on, surely?

And so it got me thinking about why these people, who all earned considerably different amounts, still collectively spend almost the entirety of it each month. Turning back to my GCSE Business Studies days and lessons on employee motivation, we have the infamous Maslow Heirachy:

 

Maslow

 

They all had houses, food, sleep, health, employment, family and friendships.. like a majority of the population in this country. So, looking a little higher we come to the self-esteem section. By their own admissions; most of the stuff they bought was to make them feel better about themselves and be happier. They didn’t need the 10th handbag or 50th china ornament but purchasing it made them feel a sense of achievement and boost that self-esteem.

The problem with relying on temporary individual events such as shopping to boost your self-esteem is that it requires a constant process. If you gain happiness from spending and obtaining new items rather than specifically enjoying the item itself with re-use, you’ll forever be running on the spending treadmill to sustain this 4th level on the hierarchy without ever progressing to self-actualization. Instead, look to gain self-esteem through achievements, confidence and gaining the respect of others without having to constantly inject money to sustain it. The sense of being Financially Independent, free of a mortgage or relying on employment is something which can  remain permanent without having to re-achieve it every month. Only then will you have the time and freedom to truly explore the top tier of self-actualization.

It doesnt matter if you earn £10k or £100k.. if you’re spending everything you earn in a month you’re still going to be poor at the end of it.

 

 

18 thoughts on “You don’t get rich by spending

  1. Totally agree with your sentiments here. The spend-to-earn treadmill is in full swing in the UK. It really bothers me to be honest.

    I think people basically need a good selection of hobbies/activities that are cheap and enjoyable. Especially craft-type ones where you get a physical product out of the process e.g. woodwork, sewing, simple re-upholstery, even the ubiquitous photography. This is something productive that people can do, they can spend a bit of money on it, but gain so much more satisfaction from having made it themselves. This I believe in turn does lead to a certain level of self-actualisation, as people will learn to develop their creative muscles…

    Cheers

    1. I’ve never really been into expensive hobbies (except maybe gaming when I was younger), but it does seem like a never-ending treadmill for some people. Totally agree that people should take up cheap, free or even income producing hobbies. I’ve started making homebrew now which is both interesting and money saving ;)

  2. I didn’t think the first part of Britain’s Spending Secrets was very good as towards the end Anne Robinson suggested that people who spend on their own don’t gain any lasting happiness from it but people who spent in the company of their family and friends do seem to. The example given of the latter was the high-spending family who went to the mall all the time to buy handbags and other crap. That made me feel like shouting at the telly.

  3. The biggest buzz the EarlyRetiredGuy gets from spending is buying shares when they’re having a sale at the stock exchange.

    1. Hah! There was one lady on the show who said something along the lines of “my happiest spend is a mortgage over-payment”.. unfortunately she was married to the car-boot sale addict who didn’t share the same view.

  4. Hmm…the house filled with ‘bargain’ items bought second hand was reminiscent of the house I shared with my ex when I was in full spendy/debt mode!

    For me, I think the thought of buying things at a discount/bargain made me happy but looking back, I think I shopped because it was habit. I don’t know why but guaranteed every Saturday, I would go to the shops and I would always buy something, whether I needed to or not. And of course, when I didn’t go to the shops, I bought online!

    It’s a change of mentality that stopped me from shopping like this – I had to change, to pay down my debts and now I do so, so that I can save/invest more.

    1. I know alot of people (my father too, infamously) who would get alot of happiness from bagging a bargain even if it was buying something they didn’t actually need/want. 50% off still means you’ve paid 100% more than you would have originally. I know what you mean about it being a habit too, how many go shopping every weekend just as their normal routine?

      I hate shopping, hate going into town filled with mindless eejits wandering around complaining about how broke they are whilst forking out for a new handbag. It is a change of mentality which saves you from this!

  5. Hi ERG,

    I have to say I watched in horror and was also shouting at the screen! I don’t get why they felt the need to constantly spend, although I could relate to the lass who was trying to pay down the mortgage but the other half didnt get it (although my other half is getting better :))
    It is learning to have a self worth that isnt related to spending money – its fine to splash the cash when you can afford to (i.e. no mortgage, retired etc.) but not otherwise!
    London Rob

  6. I’m sure similar situation happens in every country. So many families just spend and spend without thinking about the future. “Oh look something is on sale so it’s a great deal, let’s get it!” They failed to ask the most important question – do you really need it? Does it make sense to spend the money on a special tool for cutting pineapples when you can easily do it with a regular knife?

  7. It’s not really a surprise when we are bombarded with messages about how having “stuff” equals success, at almost any level of income. Until frugality becomes an admired trait and has some admired role models (people like us, obviously) we’re doomed on the treadmill. The idea of giving instead of spending needs publicity too. I saw a bit of this programme. It seemed quite interesting, but focused more on the entertainment aspects of what was being discussed – oh, look at them and what they’re doing! When I saw the fashion-victim single mum, her apartment full of unworn clothes, it was obvious that our emotional relationship to money, like food and drink, is pretty deep and complex. But that wasn’t what was being discussed, much as I sensed Ann Robinson wanted to follow that line.

    1. Yes, I also got the sense that they were kind of touching on people’s emotional relationships with money but then didn’t follow it in depth. Would love to see them do another program which went into more detail about the psychological responses people get from spending.. I’d even volunteer for them to monitor my brain as I recoil in horror at some of the over-priced crap I see people buying when in town!

  8. I watched the show on catch-up (we don’t have a TV licence) and I completely agree. My partner and I are both self-employed and we often have to hit the stores and pick up deals that are business related, sometimes I can be stood in a shop and my mind will wonder, more often than not it’s to why all these people are in the shopping centre. Most of them are wondering around with no aim or purpose, there strolling the shops for leisure. GASP! The human race continues to confuse me.

    I completely agree with everything you’ve written, it’s funny to see how the other half live. – The other half being around 95% of the UK population.

  9. Wow, GCSE bus studies sounds like it has jumped up a notch on the “depth” scale since my days. All we did was case studies of some bakery shops accounts and Microsoft Access nonsense :)

    I caught some of this TV show as well and was thinking many of the same thoughts as yourself, there was a lot of criticism about each persons levels of spending, the higher spenders(/earners) cannot possibly see how the lower spenders are happy with the low level of income and spending, while the lower spenders don’t see why the higher ones need to spend so wastefully to be happy, but they are both not so different from each other if they are are spending what they earn, as you point out.

    I think we learn this sort of behaviour at such a young age most people never question it. In fact I think it is getting worse nowadays as there is more abundance of “stuff” than ever, some of my friends young children have so many toys it takes over the house, what sort of lessons is that teaching them, they must get something new and shiny every other day. Surely this is just a consumer zombie training camp, and they are destined to be the next generation of Apple fanboys upgrading their TVs, phones and other gadgets every year or so…?!

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