Let’s face it, rich people obviously know how to handle money management and finances. The fact is however that a large salary and a corner office isn’t the only way to “strike it rich”. Regardless of the person’s actual income level, if they invest wisely and do their best to live modestly they will be on just as favorable a road to wealth as someone who is “rich”. With that in mind we put together a number of frugal habits that the upper class have taken to using. Use them yourself and you’ll build financial independence and long-lasting wealth. Enjoy.
Frugal Habit #1) Live in a modest, affordable home. Have you ever heard of Warren Buffett? If you have, you know he’s a billionaire investor but you might not know that he still lives in the same home that he bought in Omaha Nebraska back in 1958 for less than $32,000. Follow his example and don’t overwhelm your finances with a humongous mortgage payment. Buy a house that’s modest but comfortable and use the money that you save every month to build your emergency fund and finance your retirement accounts.
Frugal Habit #2) Be ready to Take Action. The simple fact is that practically all self-made millionaires have one thing in common: they are true people of action. They don’t spend their days sitting around waiting for something “good” to happen and they certainly don’t have the “lottery mentality” that many people today have. They take risks (where appropriate) and are always looking to improve, find more knowledge and gain a competitive advantage in every financial aspect of their life.
Frugal Habit #3) Don’t carry huge wads of cash. When Bankrate.com did a recent survey they found that people who carried large amount of cash were also same people who were buying luxury cars, jewelry and other electronics. They were also the same people who were not millionaires but were trying to appear as such. What we advise instead is to do what the millionaire oil mogul T. Boone Pickens does. Even though he’s worth ridiculous amounts of money he actually still shops with a grocery list and carries small amounts of cash in his wallet rather than trying to impress people with a big wad.
Frugal Habit #4) Purchase and drive a modest car. Although pulling up to a stoplight in a sweet ride might impress the perfect stranger next to you, it doesn’t do much else besides deplete the amount of money that you could possibly put into investments. An automobile is simply something that should be able to comfortably get you from point A to point B. If you let the price tag of your new car define who you are, you’ll also let it define the amount of money that you have in your portfolio, savings and retirement accounts. Better to follow the example of Facebook founder Mark Zuckerberg who, despite his millions, drives and Acura TSX sedan that costs about $30,000.
Frugal Habit #5) Never Pay Full Price for anything. Did you know that First Lady Michelle Obama often shops at Target rather than the much more expensive high-end department stores that she can obviously afford. Hilary Swank, estimated to be worth close to $40 million, is known to use coupons at the grocery store. Having a frugal mindset and taking advantage of everything that you can in order to save money will definitely help you to become rich.
At the end of the day, truly rich people are the ones who take the money that’s coming in and invest it wisely, live frugally and save as much as possible. Those who try to make their money support an unsustainable lifestyle are almost always the same people that never become rich. In the end it all boils down to the choices you make and your personal financial responsibility.
If you have questions about personal finance please let us know and we’ll get back to you ASAP with advice, answers and options.