Investing Information

The Real Cost of a Bad Habit

What is the value of a good habit? Think of some daily habits, like brushing your teeth, or buckling a seat belt, or flushing. All of these habits have value important to some part of life. Failing to follow through on some habits can lead to some nasty results, and those results could cost us our lives.

Now, transfer the idea to financial habits, like saving a little money each month, or regularly adding to your 401K or IRA. You will realize that the financial value of good habits can be quite high. On the other hand, if we fail to develop good financial habits, the cost can really build up over time. Most people don't ever count the cost of their own bad investing habits. Sure, we'll get a quick bit of excitement, but not only will we make our own lives more difficult, we'll pay more for the same result in the long run.

Forget the ads. And whatever the guy down the street (you know, the one with the attitude and the bling-bling) wants you to believe, nobody ever has "enough" money. It's basic economics folks: remember supply and demand? We always want more bling; we always find a way to spend our money; we get more bling based upon our limits. Naturally, if we don't like the limits, then we need to do something to increase our limits: better-paying job, better investments, career as a bank robber (kidding!), etc.

Saving more and spending less are unpopular ideas in American culture these days. Apparently, people are more concerned with how they look than with having a say in their own future. But you'll find that most wealthy people are actually quite thrifty, which is how they became wealthy in the first place. Those who aren't thrifty generally become unwealthy quite quickly. And believe it or not, income is not the primary success factor in reaching your goals. Many high-income people spend recklessly, which is why we always hear about formerly famous musicians, actors and sports figures that don't have a dime to their names.

Wealth is a matter of discipline and good habits. This is true for us as well as for our children. In our society, children are given almost everything they want. But who is giving kids what they need, like good habits necessary for a happy, self-managed life? Junior grows up without a sense of reality, he can't manage his life, and can't live within limits. What a surprise?or is it?

Live within limits. Resources are never unlimited and this first good habit is the best. While we should always seek to expand our limits, and broaden our horizons, it makes no sense to kid ourselves by thinking the limits don't exist. Denial makes our next steps increasingly difficult, and digs the hole deeper and deeper.

Develop the right financial habits. Little decisions add up. Think: drinking 2 sodas, or smoking a pack of cigarettes a day can easily make the difference between affording to retire when we want to, and having to work till we drop. All those sodas and packs of cigarettes, over time, add up to hundreds of thousands of dollars at retirement!

Now, practicing good habits doesn't mean never spending. Decide what your limits are, make a plan and spend within your own plan. You'll find yourself to be much happier when you do - and you can still have the bling!

Scott Pearson is an investment advisor, writer, editor, instructor, and business leader. As President and Chief Investment Officer of Value View Financial Corp., he offers investment management services to a wide variety of clients. His own newsletter, Investor's Value View, is distributed worldwide and provides general money tips and investment advice to readers both internationally, and in the U.S.

Scott Pearson can be reached for questions and comments directly at or by visiting

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