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HOW TO RETIRE EARLY
MONEY DECISIONS IN YOUR 20's FOR EARLY RETIREMENT IN YOUR 40's.
6 “Normal” Purchases Affluent People Don’t Make
Posted on: 12/11/2017
In a world where we’re constantly inundated with advertisements (5000 every day, in fact) it’s not surprising that many people feel a strong, ever-present urge to spend.
  
If you’re trying to save but feel your paycheque burning a hole in your pocket every time you enter a shopping centre, it’s time to think about how the things you purchase today can affect your financial security tomorrow.

While your earning capacity is undoubtedly just as important as your spending habits, there’s no denying that some of the wealthiest people in the world are also incredibly thrifty.

This list shows what the ‘haves’ don’t think is worth having, so that next time you are tossing up whether or not to buy that third $500 pair of shoes you can ask yourself: WWWBD - What Would Warren Buffet Do?
1. A Brand New Car
Buying your dream car hot off the factory floor may be an incredibly exciting experience, but it’s also an entirely unjustifiable expenditure.
  
Most people know that a new car’s worth will rapidly depreciate, but did you know that you can expect to lose up to 20% of its value in your first year of ownership? And, if you’re not buying your new car outright, you’ll also lose even more money paying fees and interest on your car loan - money that you could have invested elsewhere!
When it comes to buying vehicles, remember:
• Never impulse buy a brand new car when there’s nothing wrong with the one you’ve got

• If you do need to upgrade, always buy second hand (even if it’s only a year old you’ll still save 20%) and;

• Always pay cash, avoid car loans wherever possible

Still can't shake your craving for that new car smell? The next time you start fantasising about a fresh new vehicle, just remind yourself:

• Facebook CEO Mark Zuckerberg drives a 2014 Volkswagen GTI.

• Carlos Slim Helú, the founder of Grupo Carso and Mexico’s richest man, drives an old Mercedes.

• Azim Premji, chairman of Wipro Ltd and one of India’s wealthiest tech moguls, drives second-hand cars and uses public transport (including rickshaws!).

• Karl Albrecht, who founded Aldi with his brother Theo (together they are worth a combined $50 billion), drives a 1980s Volkswagen.
2. Take Out Lunches
If you’ve ever worked in a full-time job, you’ll be familiar with the daily temptation to duck down the road for a convenient lunch from your local cafe, restaurant, burger shop or bakery. On the flip side, you’ll also understand the guilt that comes when those lunches and coffees make an appearance on your bank statement later in the week.
  
We all know packing your lunch is an easy way to save money, but do you realise that those savings can add up to $2000+ over the course of a year?
In fact, some of the wealthiest people in the world refrain from going out for lunch:
  
• Amancio Ortega, the fourth richest person in the world, spends his lunch time alongside his employees dining in his workplace cafeteria.

• Charlie Ergen, chairman of Dish Network, brings a sandwich and a Gatorade to work every day.
Need more convincing? Check out this Huffington post article on how packed lunches can make you healthier, wealthier and wiser.
3. Luxury Clothing & Accessories
Sure, sometimes expensive wardrobe items can be an investment. A rare, high-quality watch can appreciate in value over time. A suave suit can help you cultivate the credibility you need to sign an important client. A unique set of cufflinks or piece of jewellery can serve as a talking point that makes inroads into valuable business networks. 
That said, expensive clothing & accessory purchases can also work against you. According to underwriters, most luxury items of clothing (excluding leather or suede jackets and fur coats) will lose between 20% and 100% of their value within your first year of ownership, having only 5 “useful years” in them.
And, while you might view your flashy items as status symbols, others may see them as evidence of frivolousness - a particularly undesirable trait in the business world. 
Some of the wealthiest people in the world are known to be thrifty dressers:
• Michael Bloomberg, the sixth richest person in the USA, is said to have bought only two pairs of work shoes in one decade.
  
• Ingvar Kamprad, the founder of IKEA, only buys second-hand clothes and can be found haggling at flea markets on the weekend.

• Bill Gates, founder of Microsoft and wealthiest member of the Forbes 400 (with a net worth of $89 billion) wears a $10 wristwatch.
4. Business & First-Class Plane Tickets
Generally speaking, money-wise people can’t justify the cost of business and first-class seats.
Tickets to comfort, free booze, real cutlery and bragging rights don't come cheap - think 5-10x the cost of an economy fare for business class seats and 10-20x the cost of an economy fare for first-class seats.
Often, thrifty business owners will choose to fly economy right up until when their time becomes so valuable that spending money on a private jet to get to their next destination faster is worth it. 
Even then, some still refuse the extra travel trimmings, including Boston Beer Company chairman Jim Koch who not only flies commercial but also makes his executives do the same.
His reasoning, (as outlined in his book Quench Your Own Thirst: Business Lessons Learned Over a Beer Or Two) is simple:  
“I can’t make the maths work — the average person at Boston Beer makes $55,000 a year. How can I justify paying over a month’s salary for a first-class ticket? Is having me get a little more legroom and a better meal really more valuable to the company than what the average person contributes every month? I’ve never believed that.”
5. Mansions & Holiday Homes
You can’t walk through a supermarket checkout without the front cover of a tabloid newspaper or magazine showing off the latest celebrity mansion. But, turn a few pages, and you’ll see gossip columns littered with stories of entertainers and athletes who were forced to sell their opulent yet ultimately unprofitable abodes.
  
Buying housing can be a very profitable investment, but impulse purchases based on aesthetic fantasies, not market research and planning, are a recipe for financial disaster.

And, while a luxury home is often the first purchase people who get a sudden windfall of cash make, some billionaires have been content to live in the same house for decades:
• Apple CEO Tim Cook lives in a 222 square metre house in Palo Alto. Speaking of his humble abode, he says, “I like to be reminded of where I came from, and putting myself in modest surroundings helps me do that. Money is not a motivator for me.”

• Walter Haefner, formerly the world's oldest billionaire (he was 101 years old when he died in 2012), lived in the same six-bedroom house for over 60 years.

• Warren Buffett bought an average sized Nebraskan house in 1958 for $31,500, and he’s been living in it ever since. He once told his shareholders, “My life couldn't be happier. In fact, it'd be worse if I had six or eight houses. So, I have everything I need to have, and I don't need any more because it doesn't make a difference after a point.”

• David Tepper, a hedge fund manager with a speculated net worth of $1.2 billion, owns no holiday home and lives in a two-story house he bought in 1990.

• David Cheriton, a Stanford Professor with a reported net worth of $1.1 billion thanks to his shares in Google, has lived in the same place for over 30 years.
6. Rent-To-Buy Schemes
You’ve no doubt seen flashy TV advertisements wherein an annoyingly enthusiastic voice spruiks the benefits of a rent-try-buy scheme. These lenders entice vulnerable consumers by carefully refuting a long list of potential objections to signing up: No deposit, low interest, no credit check, no waiting period.

The reason these offers seem too good to be true is that they are. Companies in the “fringe lending sector” target financially illiterate consumers with “deals” that will see them paying anywhere from 2.6-10x the value of the hired item in interest. Then, to add insult to injury, these consumers will also have to pay a "balloon payment" at the end of the contract to actually own the item they’ve been paying off.
Wealthy people shun getting into debt, especially for depreciating assets for consumer goods. Six billion dollar man Charles Schwab says it best: “If there’s not enough money in the bank account, you don’t spend it.”
 
Desperate times don't always call for desperate measures. If you can’t get a bank loan to purchase an essential item, it’s a good idea to see if you qualify for the government's No Interest Loan Scheme (NILS). 

In Australia, anyone earning under $45,000 (after tax) can be eligible for a $1500 no-interest, 12-18 month loan for essential items like fridges and washing machines. Find out more about NILS here.

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