The 7 Financial Norms That Are Destroying Your Wealth

Whether we like it or not, many of us are throwing our wealth away every single day. This is in large part due to deeply ingrained cultural norms that are eating away at our finances.

So today I want to break down how seven particular financial norms are destroying your wealth, so you can recognize and avoid them in the future. By disavowing these norms you’ll be able to save and invest more money to aid your journey to financial independence. Trust me - breaking away from these things has played a huge part in helping Amon and I achieve FIRE!

1. Overspending On One-Time Events

By “one-time events” we mean sweet 16s, weddings, special anniversaries, etc. Let me share a statistic with you: In 2019, the average U.S wedding cost 33,000 dollars. That’s $33,000 that you could be saving and investing, but instead, you’re expected to spend that on a single day. It’s baffling.

When Amon and I got married, we went to a justice of the peace to solidify the marriage. It cost us $50 all up. The idea that we should spend thousands of dollars and potentially go into debt just to get married seemed insane. We wanted to build up wealth over the long term, and we knew having the “average” wedding was not going to help us to do that.

Of course, if you’re planning a wedding you don’t have to spend only $50. But I would implore you to consider the advantages of having a downsized wedding versus an expensive one. Even a $15,000 wedding leaves you with almost $20,000 of savings.

2. Storage Units

Why is it normal for people to have so much stuff that they need to rent a storage unit? Hiring out storage units for years is a common practice, and these units can cost as much as $60-180 a month! Take someone who rents out a storage unit for ten years at a rate of $180 per month. If they were to put that same amount of money into a total stock market index fund over 10 years, they would end up with more than $40,000!

This is a perfect example of how many of these societal norms can erode your wealth-building potential over time, by taking away large sums of money that you could be saving and investing.

3. Retail Credit Cards

So you know those credit cards you can apply for at the register at Macy’s or Gap? Applying for one of these cards might just be the most impulsive of all these norms that can affect your wealth. Not only are you taking out a credit card, but you’re doing it on a whim at a department store register!

These cards are notorious for having super-high interest rates and going out of their way to incentivize you to spend more. With these retail cards, you can easily end up spending more on products and interest than you ever would with a regular credit card.

4. Brand Names = Elite Status

I’m talking about people who walk around with $10,000 purses or watches because they are apparently signifiers of status. And there are a lot of people who buy these brand-name luxury items when they can’t necessarily afford them, but they do so just to keep up with the Joneses.

And yet they probably have coworkers who work in the same office and earn the same amount of money, but they have more wealth because instead of purchasing $10,000 accessories they are pouring that money into an investment portfolio.

A lot of people fall victim to the idea that these luxury items bring some kind of intrinsic value to their life. But I want you to think back to the last high-end item that you purchased - how much value did it actually bring to your life? And are you still happy with your purchase?

5. Overspending On Your House

This is mostly for readers from the United States. In the US, people typically apply for mortgages that are 30% of their income. What’s more, they want homes with a tennis court, five bathrooms, a cinema, and more. A lot of homes in the States are huge.

They are also paying off that mortgage for an average of 30 years and paying interest too. I would highly recommend that US readers looking into purchasing a home, consider buying a smaller one. Think about it - if you’re spending even $500 less a month, you could put that monthly $500 into a total stock market index fund and end up with one million dollars in your investment account after 30 years!

6. Student Loans

This one is gonna hit home for a lot of people. But many students just accept that they have to be saddled with an enormous student loan to get their education. But a lot of those people don’t even consider applying for student loans or grants or seeking out programs that can help them to fund their education.

There is plenty of money out there for students, so make sure you’re looking into every opportunity to lessen your debt, or even get your education for free!

7. Investing Is Not For Everyone

This might be the most infuriating norm on the list. Many people seem to think that investing is only for people with exclusive knowledge about the topic. This is so wrong! Investing can be very simple, you don’t have to be Warren Buffet (or be as rich as Warren Buffet) to invest successfully. Being an investor should be a cultural norm because it’s an essential way to build wealth so that you can achieve financial independence.

It’s important that you understand that you don’t need to live by any of these cultural, societal, and financial norms. And in fact, if you completely ignore them you’re going to be much better off (and much wealthier!) in the long run.