How Wealthy People Manage Their Money | Pocket Byte #39

In this episode of The Wealth Effect, we break down one misconception about wealth: the idea that once people have money, they can’t resist spending it on luxury and status.

Episode Transcript

(00:00):
Welcome back to

(00:00):
The Wealth Effect.
Today, we're talking about how wealthy
people resist the urge to
spend all their money on
luxury items.
We're not talking about the flashy rich
that are rich only for a few months,
like influencers, but the wealthy, the
ones who build and grow their fortunes
over years
and decades.
Many of us assume that once you have the

(00:22):
money, you start spending like you've won
the lottery.
But the truth is that most successful
individuals view money that is
indifferent, not a scorecard, and their
spending habits reflect a different set of
priorities.
Wealthy individuals focus on value over
price, and they think about the purchase's

(00:44):
lifetime value.
Instead of buying a trendy shoe that
will fall apart in six months to a year,
they're buying a high-quality
pair that lasts a few years.
This isn't about
being cheap.
It's about being
incredibly smart.
They recognize that constant replacing
actually costs more over time.

(01:05):
The looks isn't even the top
value of buying that pair.
This mindset is famously embodied
by billionaires like Warren Buffett,
who still live in the same
modest home he bought in 1958.
And when Mark Cuban splurged on a
private jet, it wasn't a status symbol.
It was an investment that bought him more

(01:26):
time, the thing that he valued the most.
For them, the question is always,
is it actually worth paying for?
The mindset shift is prioritizing
experience over material goods.
Research shows that experiences provide
more lasting happiness and fulfillment
than actual items.
Luxury goods have become so accessible

(01:48):
that they no longer represent the same
level of status.
The ultra-wealthy are now turning to
things that can't be easily copied or
posted on social media, like unique
travel, fine dining, or exclusive events.
The greatest misconception about
wealth is about their spending power.
True wealth is about

(02:08):
access and experience.
By focusing on experience, the
wealthy don't deprive themselves.
They're choosing to invest in
memories that hold a lasting value.
The wealthy focus relentlessly on growing
their net worth, not their income,
which is a common
pitfall for many people.
As they start to experience lifestyle

(02:28):
creep, where their spending increases
every time they make more money,
wiping out their accounts back to where
they were, or
even worse.
The truly wealthy manage and automate
their finances to prevent this.
They set up systems to automatically move
money into investments and savings before
they even get a
chance to spend it.

(02:48):
This removal of emotion, temptation,
this removes the emotional
temptation to overspend.
When a wealthy person gains money,
they pretend like it never happened,
allowing their investments
to grow exponentially.
And they don't stop once they
become financially comfortable.
They maintain
these habits.

(03:09):
They maintain a discipline, a systematic
approach is far more powerful than relying
on sheer willpower.
True financial success
isn't about you.
True financial success isn't about your
income, but about your net worth and your
access to things.
The way wealthy people manage
their money, you can do as well.

(03:30):
Even if it kind of sounds silly to manage
$3,000 a month, that
eventually starts to manage...
That eventually
starts...
That means you start managing
$20, $50 charges on categories.
But if you don't start somewhere with
small amounts, you'll never get a chance
to manage hundreds of thousands of dollars
because you can't even manage $3,000.

(03:52):
And it'll never let you grow your wealth
to the point where you actually get to see
these amounts in
your bank account.
Until next time.