Wednesday, October 13, 2010

When you tie your self-worth to your standard of living, you will always be poor.

When you tie your self-worth to your standard of living, you will always be poor.

Let's say you want to drink coffee. You can choose between Starbucks (upper class and expensive), Panera Bread (slightly less expensive) and McDonalds (cheapest).
If going to the McDonalds makes you feel embarrassed, and lower class, then chances are, you tie your self-worth to your standard of living.
So let's say you go to the Starbucks and instead of $1 for a coffee in McDonalds, you spend $2.79.
In other words your standard of living has been raised in order to make you feel good.
Now multiply this effect across the hundreds of spending decisions you must make over the period of a month.
For every buying decision you make, if you pick the premium option, your bills at the end of the month will be a lot larger than necessary. You will either land heavily in debt if unrestrained,
or if you force yourself to pick cheap, you will feel unworthy and miserable.

Take another example. Let's say you have $2500 to buy a car. You can choose to buy an old car, say, a 11 year old Toyota Corolla for $2500 OR a new Honda CRV SUV costing $23,000. You are embarrassed to drive the Corolla - it has some rust spots and looks worn. Most of all, it is below your standard of living! So you pay the $2500 as a down payment, and buy the spanking new SUV. The payments are only $600 a month...

Do you see my point? The cumulative cost of all these 'minor' decisions will soon engulf you!

When you tie your self-worth to your standard of living, you will always be poor.

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