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Shark Tank investor and entrepreneur Kevin O'Leary spoke to Erika Kullberg on August 22, 2023, discussed the importance of financial discipline for long-term wealth. During the conversation, he stressed the need to keep costs undercontrol and underscored that spending restraint is key in creating long-term wealth.
Erika Kullberg asked O'Leary about his relationship with money and how to better one's financial position. The investor said that most people are spending more than they can afford, usually financed by high-interest credit card balances.
"Ninety percent of the time you're spending more than you make, and you're going into debt usually on a credit card of 21 percent. That's what destroys people. They just don't live within their means," he added.
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His response highlighted how unchecked spending habits can negatively impact long-term financial stability.
The importance of financial discipline: Insights from Shark Tank Kevin O’Leary
Kevin O’Leary highlighted the need to monitor personal finances in order to know how one spends money. He clarified that recording income and expenses for 90 days can show financial imbalances.
"You just write down over a 90-day period your sources of income, whatever it is, whatever you make. I don't care if you're hustling on the side or you're a waitress or you're an Uber driver. I don't care. That’s your income," he noted.
O'Leary explained that writing down all expenses, including rent, food, and other things, helps individuals know whether they are spending within their limits. He stated that for most times, consumption is greater than income, which leaves one under financial stress and potential accumulation of debt.
The Shark Tank investor said that this tends to cause people to run up debt, specifically on high-interest credit cards, which can complicate financial stability.
Avoiding unnecessary purchases to improve financial stability
O'Leary clarified that most individuals engage in wasteful spending that does not lead to their economic prosperity. He used an example of a method his mother employed, which was purchasing fewer goods of better quality instead of amassing unnecessary items. He added that most people's closet is "full of cr*p" they don't need because they bought things they "just don't wear" or they wore it once and now "it's just crap."
The Shark Tank investor described how concentrating on necessary buys can avoid unnecessary spending. He also talked about how a lot of people use credit to purchase expensive things they do not need.
He added that if a person couldn't afford a watch, they "should never go into debt for a watch." O'Leary called it "stupid," before adding that the person "should earn a watch." The investor explained that making significant purchases only after achieving financial success can help individuals avoid unnecessary debt.
Reducing everyday expenses to increase savings
O'Leary further gave examples of how small amounts of money spent here and there add up. He said that the daily spending on non-essential things like fancy coffee and takeaway food can leave less money to save and invest.
"Stop buying coffee for five dollars and fifty cents. I can walk around with anybody for a day and show you that they're wasting 15 percent of their money, sometimes 20," he added.
The Shark from Shark Tank explained that making small changes, such as eating at home, can save individuals a great deal of money over time. He also discussed how much it would cost to eat out regularly.
"You go to work, you spend 15 bucks on a sandwich. What are you, an idiot? It costs you 99 cents to make a sandwich at home and bring it with you," the Shark Tank investor said.
The investor explained that reducing these expenses can improve financial stability and increase savings for long-term investments.
Watch Shark Tank on ABC every Friday at 8 pm ET, with episodes available for streaming on Hulu.
