Everywhere I look I see opportunities to spend money.  Some of them are tempting, but many others are not.  Certainly we all have needs and wants.  Recognizing how the “wants” can hurt you financially is a huge step in the right direction.  Here are my top 10 ways to waste your money and after those 10, we’ll look at what you could have done with the money:

Top 10 Ways To Burn Through Your Money:

-Custom wheels and tires that “spin”: $2500

-Custom car stereo: $1000

-Designer handbag: $300

-Yard service 26 times per year: $480

-Top of the line TV: $3000

-Jewelry: $750

-Restaurants (annual): $1200

-Designer Watch: $250

-Brand new car: $25,000

-Vacations: $3000

Total of all “extras”: $37,480

First of all, I didn’t make this up.  I know families that spend more than this on a yearly basis.  They upgrade their cars every year or two, they take multiple vacations and certainly easily spend this much money on “extras” each year.  Now, they definitely need to enjoy life.  This post isn’t about depriving someone of that.  But let’s look at what kind of an impact this spending pattern can have on a person’s long term finances.

$37,480 invested @ 9% interest for 32 years becomes $599680

Let’s say that they only spend half of this money in a year and then invest the rest.  They still get to have a good time, but they have to be a bit more selective on their spending:

$18,740 invested @ 9% interest for 32 years becomes $299,840

Either way you look at this scenario it is clear that this family is sacrificing their future for the “wants” of today.  If you want to get really ugly, you could consider how bad this family’s finances would be if they had borrowed the money to maintain this lifestyle.  (And plenty of families have).

My guess is that these people don’t recognize the value of having money work for them.  They are caught up in the cycle of earn, spend, repeat.  If there is one clear difference between the “wealthy” and the rest of us it’s that the wealthy realize how powerful it is to have their money working for them.  Many of the rest of us do not.  That’s why lottery winners end up broke and people who suddenly start making a lot of money in their careers also start spending lots of money.  Turning the corner from working for your money to starting to have your money work for you is probably the most powerful financial enlightenment you can have.