Three Reasons You Are Not Rich (Yet).

Most of us are looking for that miracle short-cut.

We want to lose 5 kilos in 1 week.

We want to be 10 x happier after 1 yoga class.

We want to win the lottery and never do a days work in our life again.

In the abscence of any million-dollar miracles this week, here are three reasons you might not be rich. Yet.

1. Because You Went Shopping. I know – it sounds obvious. Doh! The reason you don’t have any money is because you bought too much stuff. You know this and I know this, but it wasn’t until I read an article by Morgan Housel that the fundamental truth of this finally registered. In it, he explains that because we ‘tend to judge wealth by what we see’, we make the assumption that the people with the great wardrobes, and the fancy cars, and the exotic holidays are RICH. If having a lot of really great stuff is how we perceive wealth, then our buy-more mindset begins to makes more sense. We are just trying to be like the rich people.  But here’s the zinger –  ‘Wealth, in fact, is what you don’t see. It’s the cars not purchased. The diamonds not bought. The renovations postponed, the clothes forgone and the first-class upgrade declined. It’s assets in the bank that haven’t yet been converted into the stuff you see.’ Whoops! – So, ‘When most people say they want to be a millionaire, what they really mean is “I want to spend a million dollars,” which is literally the opposite of being a millionaire. This is especially true for young people.’ (For tips on avoiding retail temptation this may help.)
2. Because It Was On Sale: Who hasn’t been a bit pleased with themselves when they saved $100 off a dress that cost $300? We (obviously) tend to fixate way more on the fact we saved $100, than on the fact that we spent $200 in the first place. It’s just the way that our brains function and relative value is mostly to blame. Dan Ariely and Jeff Kreisler wrote a blog on the TED website about this very thing and explains why it’s not (entirely) our fault; ‘When it is hard to measure directly the value of something, we compare it to other things, like a competing product or other versions of the same product. When we compare items, we create relative values.’ Problem is, we tend to compare the same dress with the different price tags – the $200 dress on sale is 33% cheaper than its non-sale original, and therefore must be a bargain. What we really should be comparing is $200 to $0,  or $200 to other things we could buy for $200 (a week’s worth of groceries/ a flight to Europe/ new school shoes for your kids). Generally, discounts ‘are a potion for stupidity.’ They essentially ‘dumb down our decision-making process’, making us buy more than we need (because you get 3 for the price of 2!) or allow us to be seduced by add-ons (because when you are spending $25,000 on a car, what’s another $200 on a tinted upgrade?) Do you LOVE IT? Do you NEED IT? Will your life be MAGICALLY TRANSFORMED by its addition? In most cases, the answer is probably not.
3. Because it is Not Sexy: Fancy dinners and Fast Cars are sexy. The bread and butter stuff of life is not – so we would rather not think about it, let alone save for it. Ramit Sethi – author of ‘I Will Teach You To Be Rich’, says that our belief that we are somehow different to everyone else is highly frustrating. ‘People are delusional about what will happen in the next 10 years. For example, if you’re in your 20s, the next 10 years will bring kids, a new car, a mortgage, taxes, insurance, maintenance, travel, life insurance, medical insurance….etc.’ And there is nothing sexy about medical insurance, my friend. That said – there is also nothing sexy about sharing a ward with 12 other people coughing their guts up, when you could be in a private room with a fruit bowl to call your own. Even though it can be almost impossible to imagine ourselves growing older –  “It’s been shown that people’s identification with themselves diminishes as they look into the future,” says Daniel Read, professor of behavioural science at Warwick Business School – at some stage it seems we might all eventually need to grow (the f*ck) up. Because being ‘rich’ is not just about a big house and a fat bank balance – it is about being able to afford a reasonable quality of life – without coming undone at the first car prang or over-priced medical bill that comes our way.

So – Be happy with what you did not buy. Calculate the true cost of what you might be saving. And keep your sexy well away from the spreadsheets, my friend.

This GET RICHER post was brought to you by someone who knows that money is not the key to happiness – but who always kinda figured if she had enough money, she could get a key made.