No matter how much money we make, there’s always a way to spend it.
You can become a multi-millionaire never making over $100,000 per year. You can also become a multi-millionaire much faster if you increase your earnings at the same time as you learn to keep more of what you make.
Let’s start with a quick story and powerful lesson…
In the 1700’s, Denis Diderot, a French philosopher, received a gift. It was a beautiful scarlet dressing gown.
He was not a wealthy man. Now with this expensive new possession all the rest of his possessions seemed out of place. Soon he replaced his chair, his desk, and more items in his house to fit his new standard of living.
Eventually these purchases plunged him into debt.
How many times have you bought one thing only to find you need to buy many more things to go along with it?
I just bought a new SUV. I also had a roof rack installed and bought a separate ski rack to attach to the roof rack. I’m likely going to get the front windows tinted a bit so less sun blares in. Hopefully I stop there.
Had I not bought the new SUV, my previous car wouldn’t have needed any new “upgrades”.
When buying something new, think about all the future purchases you’ll likely make as a result of owning that new thing. It’s far more than the item itself.
This is why buying expensive toys such as boats, second houses, extra cars, and motorcycles is such a bad idea. You have to pay for insurance, maintenance, storage, moving transportation, and more all adding to the initial cost of the purchase.
Other than your car and primary house, it’s almost always better to rent anything else you want.
The first lesson in keeping more of what we earn is to remember the Diderot Effect: one purchase almost always leads to many more purchases. Calculate the full cost before any purchase and you’ll have more money to achieve financial freedom faster.