Categories of people: -

1. Spend everything and save nothing - These people have a habit of spending everything they earn. They will spend everything to make their life luxurious right from the start. They will buy a good home, large TV, big car, costly dining at hotels etc. And after all these spending, their interest will be so high that they will not be in a state to save anything. Thus they live a life of luxury enjoying and anytime they have any money left, they will go and buy something else as this is the time to enjoy and savings and all can be done later on in life. Satisfying themselves by planning to start saving later on in life is pretty common with them. But remember that once you get into a habit of spending everything, it is very difficult to resort back. You just cannot see a lot of money in your hands, you are addicted to spending and without spending you wont feel nice at all. And thus the “will save later” story will continue on and on. Now remember, you earn nothing extra, you have no savings and thus your passive income is zero.

2. Save everything and spend nothing - These people have a habit of saving up everything of what they earn. They would just have some minimum expenses and rest of all will get saved into bank or invested into stocks. They have extra expenses once in a blue moon. Well of course they will end up having a lot of money, especially passive income from the investments and savings, much more than the category 1 as time passes, but I would ask that what is the use of earning money if you just cannot spend anything? You still live in a small home, drive a small car etc, and live a frugal life forever. I believe that saving is good but just saving and no spending is not justified. They might enjoy their life like that but I’m pretty certain that if they spend only a part of their income in improving their lifestyle, they would be happier. And I am not asking to spend everything, but spend only a part of. Let the passive income flow in and spend some of your income and reduce the saving as by this time the passive income is already generating nicely and the only way for it is up. So just spend a little bit and see how your life improves and makes you even happier.

3. Spend some and save some - Probably the best category out there. Here people save and spend both. You are spending a part of income on enjoying the life and saving a part of income to enjoy even more in the future. Since money is getting invested into the stocks, passive income will flow into the pockets, so tomorrow is bright for sure and even today is not dull at all. You don’t lose the habit of spending and you also have the habit of saving. This way we can enjoy life forever, once a good passive income flows, we can get richer than the one who always spent everything, we can even buy everything they have and still have savings increased as the passive income would flow till your savings stay invested and which always will. They will be less rich than the category 2, but the life prosperity would definitely be higher.

I will discuss more on savings and importance of savings in upcoming posts. Stay tuned =)

Well, this is not entirely true for everyone as a lot of people have self control, but then it is definitely valid for those who have no self control. And many times these items attract us even when we are determined to not spend anymore than what we have planned. And it is evident that if you used cash, then you would not be able to spend anything extra simply because you cannot. I have personally seen people doing this and so I know how debit cards actually lure you to spend more. I still remember the evening I was walking inside the mall and my friend asked me to come into a clothes showroom. I rejected the idea with the reason that why should we go in when we don’t have to buy anything. So he said that he knows that we won’t buy anything but just wanted to go and look at the new clothes that were present in the store. We went in and he actually ended up purchasing two shirts because he liked it so much. I tried to stop but he was too attracted towards them. And guess what? He used his card as mode of payment and the reason he gave was that recently money was transferred into his account, so he was okay with the spending. He didn’t have enough cash to buy, but only because of debit card he spent over 2000 bucks on shopping even when there was no intention of purchasing.

The only solution to control this extra spending is either make it a habit of spending only through cash whether you keep the card with you or not or just don’t keep the card at all. Leave the card at home when you go for shopping, so even if you want, you cannot spend anything extra than what the cash in your wallet can buy you. Just think that if my friend had no card in his wallet, no matter how much he wanted to buy, could he? Remember that when you keep a debit card in your wallet, you are actually carrying all the money in that account in your wallet, the only difference is that all the money in that account is being masked over by an electronic card.