Israf signifies extravagance and wasteful use of what is otherwise permissible. Three factors are used to identify actions that fall within the boundaries of waste: Firstly, permissibility in Shariah, which means that forbidden acts exceed the limits even if there is no extravagant monetary spending. Secondly, rational judgment, which proscribes spending considered as being wasteful and foolish—such as destroying one's wealth for no good purpose. Thirdly, societal norms, which indicate the limits of normal expenditure from that which is excessive and wasteful—and this can vary from individual to individual. Permissible levels of expenditure on the personal as well as family levels are consequently not the same for everyone in a given society. One individual may spend his money in a certain way that will be considered as israf, while another individual may do the same but will not be considered wasteful.
Imam Sadiq is also reported to have said: "Many a poor people might be more extravagant than the wealthy!" It was asked of him: How can this be so? The Imam replied: "The wealthy spends out of what he has but the poverty-stricken individual spends beyond his financial position."
"The Middle Path of Moderation in Islam: The Qur'anic Principle of Wasatiyyah (Religion and Global Politics)" - Mohammad Hashim Kamali, p. 147