Why We Spend More Than We Have

There are two main reasons why most entrepreneurs (and I used to) spend more than they should on things they really don’t need:

1. It’s human nature to spend what you have. Whether you’ve got $1,000 or $100,000, you will find a way to spend all of it unless you automatically deduct a percentage of your revenue as soon as you receive it. We have a false perception that what is, today, will also be tomorrow (or even be better). If we make $100,000 today, we feel we will always make at least $100,000. But success is not a direct path upward; it is more like a hornet’s nest that weaves and knots its way upward.

2. It’s human nature to follow the status quo. When setting up your business, you’re likely to look to other businesses in your industry as models for how to do just that. This approach will lead you to spend money on things you don’t need (or even want) just to appear more “legit;” things that, in the end, are of no benefit to your company. Fancy business cards, bored receptionists and nearly empty offices are all too common for first-time entrepreneurs.

Whenever I consider taking on a new expense, I ask myself if it would help me to better serve my clients and reach my goals. And if I do need it, I ask myself how I could get it for free or almost free.

Comments

2 thoughts on “Why We Spend More Than We Have”

  1. Very true or that we want to stretch that dollar expecting a huge return. I think its very essential that we have a mentor. Mentor tells us that what we need and don’t need necessary. Invest into a mentor!

  2. Hi Mike,

    I have begun to take the tentative steps to implementing Profit First in my business and my personal life. (Bank accounts set up, percentages and targets being scrutinized.)

    I wanted to thank you for sharing this information. Nobody ever teaches us how to manage money! I remember my Mom telling me to “pay yourself first” when I was younger. I never really understood what she meant, so I translated that to mean…. buy yourself a nice pair of shoes as a reward for all your hard work! (Ugh, all the years and money wasted.)

    Today, thanks to you and your book, I now how an action plan on how to keep and manage my money. Thank you!

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