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How Living Cheap, Looking Rich Can Help Your Personal Finance and Career in Recession

Live Cheap, Look RichLiving below your means doesn’t seem a desirable decision to survive today’s recession.

There are better ways, and although living below your means are the next logical step when you are in financial strain, your sense of achievement must be maintained.

Why is that?

In order to keep yourself on track in navigating through the economic storm, you need to stay focus. Staying focus can be achieved through the fulfillment of your need for achievement – and living below your mean is not the way to fulfill yours.

Live cheap, look rich

Living cheap is not living below your means. Living cheap means living within a closely controlled budget to achieve the living standard that anybody else has on a higher budget.

The main idea of living cheap, looking rich is to aim to get the best deal in every way, including clothing, entertainment, etc. in such a way that nobody would know that you spend less for the look you have right now.

‘Look’ here is not only clothing, accessories, or any other apparel and fashion related products – ‘look’ is your lifestyle, in a standard that can’t be achieved by living below your means.

‘Look’ is going to Starbucks occasionally, and socialise with your friends and colleagues. ‘Look’ is how people perceive of you, no matter you achieve ‘it’ by bootstrapping. You shouldn’t overdo them, though.

The key in living cheap is total control of your budget.

Why living cheap, looking rich is smart

We live in a society that value physical appearance, lifestyle and charisma. Enhancing yours will actually help you land better job, secure more business, or socialise with more people (which can present you with more opportunities) – all in all will affect your bottom line: your personal finance, in a positive way.

You deal with people, and most of them don’t really care how much you make – what they care is what they see, and how they preceive of you. For example, in a meeting with business prospect, you need a professional look that commands confidence, charisma, and trustworthy. You don’t want to meet your future client in your t-shirt, don’t you.

How to live cheap, look rich

There are ways you can consider to live cheap but look rich:

  • If you are into fashion and business as well, purchase your clothing needs with a wholesaler. While hard to find, wholesale clothes can save you a lot of money. The problem is, they usually only allow you to buy in bulk (usually in half-dozen or dozen).
  • Alternatively, you can shop in consignment and/or discount stores.
  • Shop for everything on the web – groceries, clothing, accessories, electronics, travel deals, etc. You can always receive a lower price for the same item you want.
  • Attend charity events and/or be volunteer. Charity events – the large one – are where socialites and celebrities. Attending the events, as an attendee or a volunteer will help you raise your profile.
  • Purchase used car – no body is really care how much you pay for the car, as long as its condition is top-notch.

Remember, don’t live below your means – Live cheap, look rich. That is good for your economics and, in effect, your personal finance endeavour.

Image by net_efekt.

Do you want status or money?

For the Brain, Cash Is Good, Status Is Better

The article linked above has some very interesting results of a pair of tests researching which parts of our brains are concerned with earning or losing money and our reputations. The unexpected, and interesting, results of the studies revealed humans process making money and increasing our social status in the same area of the brain!

The area of the brain called the striatum had previously been identified as the brain’s monetary reward center. These new studies show the striatum is also where we process social values. This means having a good reputation affects our thinking in the same way as earning money. The studies further revealed that improving our reputation has priority over earning money in the straitum. So the answer to the title question of this post is that our brain functions to prefer status over money!

I can think of several ways this effect shows up in our lives:

  • An improved job title will often satisfy us more than getting a raise. We want our reputation and job description to show our status in life and will forgo more money.
  • A smart employer will understand that an employee’s status and reputation may have higher priority than actual income (within reason!). Employers should make sure employees are recognized in a public way for there contributions.
  • This characteristic can be dangerous in our financial decision making. Are we electing to make or avoid a financial decision because of how we think it affects our reputation? Or how it will affect us financially? This can apply to many areas: buying a home, making an investment, choosing an advisor, and even making everyday purchases.
  • This information may explain why we will pay significantly more money for similar items because of the brand or store.

Now that you are aware that your brain process your reputation and earning money in the same brain region, try to be cognizant of your financial decisions. Are you making them to improve or maintain your status, or to improve your net worth?

Cutting costs doesn’t mean losing status

The New York Times recently ran an article on the many ways that Americans are finding to cut costs in the current price-of-living increase we’re facing.

Spending data and interviews around the country show that middle- and working-class consumers are starting to switch from name brands to cheaper alternatives, to eat in instead of dining out and to fly at unusual hours to shave dollars off airfares…Retail sales figures and consumer surveys confirm that Americans are strategically cutting corners, whether it is at the coffee house or the airport.

If you’ve been feeling the pinch of $3.60-a-gallon gas and milk, you’re not alone; it’s happening to everyone, and people are acting on it instead of pretending it’s not there. They’re pinching pennies, cutting back on luxuries, doing for themselves rather than purchasing convenience.

Discounting worries over the economy and such, this is fantastic news for our brains. Consider: we don’t have to spend money we don’t have to look better than our neighbors. In fact, if our neighbors are pinching pennies, we may not even have to spend the money we have. The social pressure is easing off (for the working- and middle-class at least) to have the newest, shiniest things, and since relative wealth is the key to happiness, we don’t have to work so hard and buy so much.

Aside from a slackening in subconscious tension that comes from being in a race for social status, being able to look better than others with less money is a positive pleasure for the brain. Two studies recently published in the scientific journal Neuron found that the brain processes monetary and social rewards similarly. Keeping up with the Joneses (among other factors) has kept us as a nation from saving as much money as we otherwise might; now, knowing that the Joneses are letting their manicured lawn go dormant and their fashionable clothes go out of style will give your brain a double charge.