7 Commonly Mishandled Spending Decisions Wealthy People Get Right
If you were to look at a group of wealthy people, there would likely be a couple of similarities among them. For starters, they generally invest in income-producing assets such as the stock market, real estate or a business.
They also avoid spending money on things that don’t provide additional value to them. These could be add-ons or upgrades when you purchase something such as a car or a home electronics item.
If you’re ready to start spending money on things that can benefit you, make sure you avoid the following costly add-ons and upgrades.
1. Extended Warranties
When you purchase appliances or electronics, you automatically receive a manufacturer's warranty that covers the product for one or two years. This covers the item if something goes wrong and, in most cases, provides a replacement. Additionally, many credit card issuers offer an extended warranty on larger purchases made with the card.
The math on these extended warranties typically favors the retailer instead of the buyer, which is why many wealthy individuals decide to pass and take on the small amount of risk.
2. Fully Loaded Luxury Car Packages
Most new cars lose a significant amount of their value the moment you drive them off the lot. This depreciation is even steeper when you include luxury trim packages. These include things like premium wheels and infotainment systems. Simply put, a $15,000 price increase due to luxury upgrades will almost always return nothing in resale value.
It might shock most people to learn this, but instead of these fancy upgrades, many wealthy people choose to drive more basic cars for an extended period of time. They understand that building wealth gets more difficult when you’re paying a monthly payment on a depreciating asset.
3. Airline Seat Upgrades on Short Flights
Upgrading to business or first-class seats on a long-haul flight can provide significant value. The food is more enjoyable, but most importantly, the seats typically recline flat, making it easier to sleep and helping you arrive at your destination relaxed.
However, spending several hundred dollars extra for a short two-hour flight often doesn’t make much sense. Instead, most wealthy individuals will use airline miles to upgrade their seats or just sit in coach. They prioritize experiences over a short amount of comfort.
4. Brand New Phones Every Year
New phones are typically released every year, but the additional features are often minimal. Given that the price tag is usually close to or exceeding $1,000, it’s hard to justify spending the money. This is why many wealthy people will keep their phones for several years until there is actually a reason to replace them.
5. Dealer Add-Ons at Car Dealerships
For many people, buying a new car is one of their least favorite things to do. Haggling for the best price and dealing with car dealerships pushing every possible add-on can be frustrating.
Most add-ons, such as paint protection, VIN etching, nitrogen tires, and fabric protection, can be big money makers for dealerships. However, for most car buyers, they’re a waste of money.
6. Oversized Houses With Unused Space
Many people dream of having a big house with plenty of living space. While it might sound appealing, wealthy people understand value better than most. Oversized houses, with parts that go unused, become expensive storage.
Instead of trying to impress others, the wealthy buy homes that fit their lifestyle. This helps them minimize the mortgage payment each month, how much they’re paying in property taxes, and the upkeep needed for a larger home.
7. Premium Cable Packages and Unused Subscriptions
Five to ten years ago, we were in the middle of the cut-the-cord movement. People were ditching their high-priced cable subscriptions for alternatives. Many wealthy people jumped on this bandwagon because they didn't see the value in spending hundreds of dollars to watch TV.
Today, we’re in a very similar situation. There are so many streaming services, and many people are subscribed to multiple ones, so you’re still paying as much for all of them together as you were for that high-priced cable plan.
The difference between the wealthy and everyone else is that they understand that unused subscriptions quietly drain a bank account. Instead, they regularly review what they value and cancel everything that doesn’t make the cut.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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