For the average working American, building wealth takes time, intention and commitment, and often, making budget cuts or changing your spending habits.
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While it can be hard to figure out what to prioritize, financial experts offered some tips on five things you should stop buying if you want to get rich.
‘Too Much’ House
If you’re worrying about spending too much on Starbucks coffee and avocado toast, your focus is in the wrong place, according to Cory Smith, a financial advisor and owner of Discretionary Inc.
“In reality, if your goal is to build wealth, then focusing on the little things like coffee at home will rarely add up to anything significant,” he said.
Instead, focus on the large items, like making sure you’re not buying “too much house.” He said that lenders will typically lend you as much as you qualify for, and it can be easy to buy the maximum house you could potentially afford.
“Try to keep your total housing expenses — mortgage, taxes, HOA fees, utilities, etc. — under 25% of your take-home pay. This move will add a few hundred dollars each month to your cash flow, which can then be redirected toward investing.”
Another significant consideration is not to rush out and buy a new car just because you paid off your current one. Instead of paying $500 or more a month in car payments, put that money into assets that will grow in value.
Things That Don’t Bring Happiness
Erika Wasserman, a certified financial therapist and founder of Your Financial Therapist, doesn’t prescribe a specific thing people should stop buying to build wealth, instead tying it into what accords with your values and happiness.
“It is going to be different for each person depending on their values and what brings them happiness. For example, a concert ticket is wasteful to someone who doesn’t enjoy music, or a cup of coffee out is ‘throwing money away’ when you can make it at home to someone who doesn’t enjoy coffee shops.”
She asks her clients what they spend money on that others “don’t understand” and their answers vary, she said, “from plants for outdoor space for a client who grew up in the city, to daily coffee runs to a mom of two kids, to paying the mortgage to a newly divorced client.”
By identifying what spending brings you joy, happiness, stress relief, feelings of security and comfort, you are then able to say no to the other things that don’t.
Luxury or Status Shopping
One of the more wasteful forms of spending is “luxury shopping or keeping an appearance of higher status,” according to David Capablanca, founder of Friendly Bear University, a “school” that teaches trading and investing.
The need to “keep up with the Joneses keeps people in debt and a bad cycle of overspending,” he said.
Competition, spending to impress or to feed the ego does very little for the bank accounts, he pointed out. “Instead of some designer accessory or bag, why not invest that money in something that will appreciate like stock or courses that can help you develop a skill to generate more income?”
Insurance and Warranties
Capablanca also finds certain types of insurance and warranties to be wasteful expenses.
“I personally utilize my credit card benefits that guarantee and apply insurance to my purchases. I’m also certain when making purchases where I wouldn’t need to buy insurance, like airfare as an example.”
He said that many credit cards offer “an array of benefits when it comes to purchases related to electronics, airfare, etc. that otherwise a separate warranty or insurance would be purchased at additional costs.”
Impulse Buys
Today’s impulse shopping looks a lot less like seeing something at Costco that you must have, and a lot more like following a social media influencer down a purchasing rabbit hole, Capablanca pointed out.
“Impulse buying in a day where social media and influencers are constantly hooking people to purchase items or experiences are trapping many from building a savings or investment portfolio.”
In a world where one-click shopping is easier than ever, it’s important to be vigilant about what you’re spending money on when you could be investing it instead.
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This article originally appeared on GOBankingRates.com: 5 Things You’re Buying That Are Stopping You From Getting Rich, According to Financial Advisors
