Ramit Sethi Says Once You Spend More on These Items, You Can Never Go Back

This post may contain affiliate links which may compensate us based on your interaction. Please read the disclosures for more information.

Ramit Sethi believes once you upgrade your house, switch to luxury hotels, or sign up for kids activities, you can’t ever go back. Here’s why. 

If you’re trying to decide whether to increase your spending on a particular category of purchases, it’s important to think about what the long-term commitment will be.

It may not be a big deal to give your credit cards a workout on one splurge purchase, for example. But, it can do a lot more damage to your bank account if you make a decision that will increase all of your costs going forward for the foreseeable future.

That’s why you may want to think carefully about upgrading your spending on these items since finance expert Ramit Sethi says that once you do, you may never be able to go back.

These splurges could become permanent

According to Sethi, there are several big splurges that could become permanent needs once you try them out for the first time. On Twitter, he warned that permanent lifestyle upgrades could include:

Moving to a larger homeSwitching from flying coach to flying first class or privatePurchasing luxury clothingStaying in luxury hotelsSigning your children up for activities

Sethi said that because it is so difficult to switch back to cheaper alternatives once you get used to these better options, he is careful about which of these types of lifestyle upgrades he chooses. And he makes sure that the added spending is sustainable before making a change.

I’ve found the same to be true in my own life. We signed my son up for some karate lessons and he fell in love with them. But they kept increasing the monthly cost of tuition and adding on new charges for belts and promotion ceremonies and the costs became ridiculous for a 3-year-old — more than $300 a month — so we decided to pull him out. He was upset for weeks and even months later I still frequently hear, “when can I go back to karate?”

Always consider the long-term impact of an increased expense

In some cases, it would be difficult to go back on these upgrades for practical reasons. For example, if you’ve purchased a larger home, selling it and moving to a smaller one could cause major upheaval in your life. You could also face significant costs, including a 6% real estate commission on an expensive property. If you’d upgraded to a $1 million home and had to go back, for example, the transaction costs would be $60,000 for real estate fees alone, plus other closing costs as well.

In most cases, though, these examples of splurges that could become permanent would only become essential long-term upgrades to your lifestyle because it would feel mentally difficult to go back. You might not want to disappoint your kids by taking away an activity, for example, and a budget hotel or a coach seat in the back of the plane would seem a lot worse to you once you’d gotten used to something better. But, the reality is you could downgrade these items if you need to.

Money is often psychological

The key point Sethi is making here, though, is a good one. A lot of money management is psychological. So, while you may theoretically be capable of scaling back after you increase spending on a particular item, you may find yourself unable to actually follow through.

And, if you’ve upgraded your expectations without making sure you can continue to afford the change over the long term, this could be a risk to your future — especially if you start taking on debt or compromising long-term financial goals to fund splurges you can no longer afford but can’t make yourself give up.

Now, Sethi’s list of “permanent” splurges may not be the same as yours. A lot depends on what you value the most. But, chances are good, there are some lifestyle upgrades you are likely going to make permanent once you make them. So, before you embark on any of these changes, take the time to really think about the costs and whether they are sustainable.

This means considering both what your ongoing income is and how much the upgrade will cost you over the long term. It may not be a big deal, for example, to switch to premium coffee that costs you an extra $20 a week over instant if that’s one of your splurges. But, opting for business class international plane tickets (which can cost two to 10 times what an economy ticket would set you back) is a much bigger upgrade to be able to continually finance.

If you do this exercise, you can make meaningful, sustainable upgrades to your life as your income increases — without putting your future in jeopardy.

Alert: highest cash back card we’ve seen now has 0% intro APR until 2024

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR until 2024, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

 Read More