Ramit Sethi says this is ‘the beginning of all financial disasters’

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It’s a decision that rarely ends well.

Some money mistakes aren’t that big of a deal in the grand scheme of things. Others can have a huge financial impact and are something you want to avoid at all costs. author, Ramit Sethi, book teach you how to get rich, recently pointed out one of these costly mistakes. This is what gets a lot of people into money troubles.

What Ramit Sethi Calls ‘The Beginning of Every Financial Disaster’

In an episode of Sethi’s podcast, he was talking to a couple who bought a vacation home. It ended up costing significantly more than they expected, so Sethi told them why they bought it. They talked about how they lived in more modest homes than their friends, and how even friends who didn’t make as much money bought better homes than they did.

Sethi was quick to point out, “This is where the whole financial disaster started.” And, frankly, as always, “The worst thing in the world is to find your friend with more money than you.

Now, the dire part isn’t discovering that your (perhaps less intelligent) friend has more money than you do. Decide. Or, as it is traditionally known, “Catch up with Jones”.

In this case, a couple from Sethi’s podcast envied their friend’s house. But there are many ways in which this feeling can manifest itself. People get jealous of cars, clothes, vacations, and so on. Social media hasn’t solved the problem, as it often fosters envy for this kind of lifestyle: Point’s survey found that 45% of respondents said that social what she saw on her media I found out that I borrowed money to buy

Why Lifestyle Envy Is Expensive

It’s perfectly normal to want to catch up with Jones. Most of us have probably dealt with this feeling at least once. The problem is acting on this impulse.

Back to the couple on Sethi’s podcast, their vacation home turned from a dream into a nightmare. It would put a huge strain on their finances, and even if it meant losing $100,000, their best option was to sell it.

This may seem like an extreme example, but it’s nothing out of the ordinary. Let’s say your neighbor bought an incredible new car and you decided you wanted one too. The average new car price he reached close to $50,000, while if it were a luxury car, he averaged $66,660.

Even for small purchases, this can become a bad habit and lead to bigger financial problems. It’s easy to justify spending more and more.

How to save money

Let me be clear, there is nothing wrong with spending money on things that make you happy. In fact, it’s wise to set aside some money in your monthly budget for this.

First, they should be things that actually make you happy – not just things you buy to keep up with others.

As I mentioned earlier, many people have lifestyle envy and it’s not always easy to get rid of. Here are some tips that worked for me:

• Remember, looks don’t always tell the whole story. That designer-wearing friend might have a high credit card debt and no retirement savings. Just because someone seems to have it all doesn’t mean they are doing well financially.
• Keep your own financial goals in mind. Consider how unnecessary large purchases might affect these goals. I like to think about how much more money I could make with compound interest if I invested that money instead of spending it.
• Set aside a portion of your income for guilt-free spending. Ramit Sethi recommends setting aside 20% to 35% of your income for guilt-free spending. The amount you save depends on your income and expenses, but it’s important to leave room for fun money in your spending plan.
• Find something you really want to spend your money on. I drive a lot so maybe a nice car is important or maybe I don’t want to spend too much money in the area so I can travel more. Take the time to figure out your spending priorities so you can spend your money wisely.

Spending money to compete with others is, as Sethi says, the road to ruin. If you can avoid it, you will be much happier and financially wealthier.