Overspending is a serious and very common problem in the United States. Overspending is dangerous because it creates credit card debt, which makes life even harder amid rising inflation and the cost of living. You may be surprised to learn that it's not just middle-class Americans and those with lower incomes who are prone to overspending. Rich people also overspend, and it can have just as detrimental an impact on their finances as anyone else's.
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GOBankingRates sat down with Anthony DeLuca, Certified Financial Planner (CFP), Certified Divorce Financial Analyst (CDFA), and expert contributor to Annuity.org, to find out what the most common things wealthy people overspend on are.
Also see 10 Ways High Income People Go Bankrupt.
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Prestigious University
DeLuca doesn't dispute the importance of a college degree. He explained that 82% of business executives and 75% of hiring managers believe a degree is necessary to be successful, according to AAC&U. But a good college education isn't just reserved for expensive or prestigious universities. This is where the wealthy can overspend.
“There's a problem of diminishing returns between attending a prestigious school and taking on a lot of debt,” DeLuca said. “It makes little sense to pay out-of-state tuition at a private school when you can get nearly the same benefits at a much lower cost by paying in-state tuition at a state university.”
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Expensive hotels and resorts
Many Americans, including the wealthy, spend too much money on vacations.
“I can speak from personal experience: you can have a great vacation experience without paying for an expensive five-star resort,” DeLuca said.
“What's the point in paying for an all-inclusive resort if you're going to spend most of your time off-property, especially on adventures?”
Dining out
The middle class and lower income brackets may be tired of preparing meals and eating dinner at home to save money. They may dream of being rich enough to be able to eat out whenever they want. This is a bad idea and is the cause of overspending among the very wealthy.
“Eating out and expensive wine are obvious but must be mentioned because they are frequent,” DeLuca said. “Rising gas prices and inflation have caused food and service costs to rise substantially. Fine dining restaurants are not exempt from this calculation.”
“An evening of good food and wine can cost almost a month's worth of groceries if you buy in bulk,” he says. “This kind of bad habit can eat into your wallet quickly.”
Designer fashion
Designer clothes will always be in demand, but expensive styles aren't a necessity, they're something the rich spend excessively on.
“I'm not blaming anyone, but a lot of people wear designer clothing not for any purpose or use, but just for the prestige they seek from it,” DeLuca said.
“You can find a ton of clothing brands online that offer almost the same things as 'luxury' brands at a fraction of the cost,” he says. “The question is: do you find purpose in the use of the clothing or in the prestige you're after?”
Buying property without understanding the market
Investing in real estate for rental purposes is a very smart move and is recommended by many financial experts, but too often wealthy people get into this action without fully understanding the rental market.
“I'm not saying that short-term rentals are oversaturated,” DeLuca says, “I'm saying that investors are buying properties without properly researching the demographics of an area. What they're left with is multiple properties with monthly mortgages and maintenance fees.”
“Don't buy because you can, buy because the numbers are right,” he says. “I've met investors who buy an area because 'I love the area.' But that doesn't mean everyone else is going to do it. Make sure the demand is there.”
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This article originally appeared on GOBankingRates.com: I'm a Financial Planner: 5 Things Rich People Do That Cost Too Much, Even for Them
