Frugal Millionaires: How They Do It

In my daily reading, I came across an article on Yahoo! Finance, written by Jeff Lehman of The Frugal Millionaires, that discussed how frugal millionaires spend their money. It’s not a totally foreign topic to me as I’m familiar with a frugal millionaire family, so I know they are out there. You never know, even your neighbor could be a millionaire, however, only 2 percent of the population are millionaires. While not everyone will ever make it to the millionaires’ club, their lifestyle can provide insight to achieving your financial goals by following what they do.

In the article, Mr. Lehman broke it down by the spending philosophy of millionaires:

  • They can easily delay their need for gratification when purchasing
  • They are resourceful in getting what they want by carefully timing consumer purchases
  • They make living below their means painless
  • They don’t like wasting anything (especially money)
  • Their sense of “self-entitlement” is highly minimized
  • Spending is OK with them…depending on what they are buying (appreciating vs. depreciating assets)

After going through the list, it is obvious that if you were to following these steps, you would be very well off when it comes to saving money. That is the hard part, it is very difficult in our daily lives to make sure we follow each point. We often fall into the trap of keeping up with everyone else and buying all the great stuff, mostly on credit. While it’s OK to treat yourselves once in a while, you still need to think the purchase through. What is the first step to be a millionaire? Spend less than what you make, it’s that simple.

So what are the tactics millionaires use to curb their spending and save more dough? In the interview with 70 millionaires their secrets are revealed on how they spend their money.

Buying Cars

When millionaires buy cars, they buy used, fuel-efficient cars and keep them for a long time. You can get a nice warranty on a used car and still have a car that is somewhat new. They avoid losing 25% of the value of the car when they drive off the lot when buying a new car. They also avoid leasing cars. I’ve also heard of only buying cars in cash to avoid finance charges. If you can’t afford it, you shouldn’t buy it!

Eating Out

No surprises here. Save some of the meal to bring home for a later meal, something we all can easily do. They eat during hours where there are specials (usually off-peak times and not on weekends) and they skip dessert. Dining out can be worth it.

Eating In

You can eat for much less if you stick at home and the best part is that you can make it healthier. Eating oatmeal for breakfast, a cost-effective food and healthy too. They are smart shoppers at the grocery store only buying food that is on sale. They also haggle on getting better prices on food. They also make eating in an entertaining affair by inviting friends and family over. Staying in is cheap entertainment and it’s enjoyable to!

Buying Clothes

Frugal millionaires buy clothes in the off-season when deals are plentiful (here is a cheat sheet schedule for buying things during the off-season). Buy clothes that will last a long time. They avoid clothing with logos so then no one will ever have to judge them by the styles and it will keep them guessing to what designer brand it might be (because it’s not). They also donate their clothes to charity.

Consumer Electronics

They only buy low end products that get the job done. They don’t buy the latest and greatest gadgets. Frugal millionaires wait until the prices drop on a new technology, such as plasma TVs, as they often drop by 75% over 5 years. They buy refurbished products as they typically last longer because they go through more stringent quality assurance tests.

Computer Shopping

They buy the more mainstream computers that are built with common components which are more often cheaper to replace because they are mass produced. Buy larger hard drives and memory upgrades to avoid future upgrades as long as it is cost effective. They also avoid spending money to upgrade software such as operating systems. Laptops are often more common to be purchased by a frugal millionaire.

Going Green

I don’t necessary agree that being green and frugalness are synonymous with each other, but frugal millionaires definitely look for ways to cut costs by going green. They look for products that will pay for themselves over time. They monitor their electricity usage and are efficient when it comes to the size of their homes. Since they don’t waste any money, they don’t want to waste any energy either. It doesn’t take much, just turn off your computer for starters.

I think the big things that I’ve learned from my frugal millionaire source is that they live in a very modest house which has been paid off for years. Both cars are over 10 years old. They never have any of the newest technology. They don’t use any credit cards. The biggest advantage for them? No one even knows they are millionaires, so there isn’t any pressure for them to act like a millionaire family. I guess that is the secret!

None of these things are all that shocking. In fact, my wife and I pretty much fall into each of the categories in some way (or at least working on it). We’re young and in debt, but we still have a shot to reach our goal of becoming millionaires. Not to discredit our goal, but we do realize that in 25 years, being a millionaire isn’t the same as being a millionaire today. Frugal millionaire club? I’m game!

Do you know any frugal millionaires? What have been their secrets to saving money?

Stupidly Yours,

Matt

Written by Matt

StupidCents was founded by Matt in 2009. His thoughts are shaped by his family and career and seasoned by his endless motivation to succeed personally, professionally, and financially.

4 Responses to Frugal Millionaires: How They Do It

  1. Great stuff.

    I you ever read The Millionaire Next Door it is very similar to what you have learned from your frugal friends. This book was a real eye-opener for me.

  2. This article is really great info and quite true. I know many millionaires that are very frugal and no one knows they are except for those who are very close to them. They never tell you just how much money they have, although they are very generous and are always finding ways to help other people get ahead by assisting in education tactics. One man that I know, helped my brother get into college and finish by assisting with finances, including grants and loans. This is his hobby through out his life, he finds brilliant young people and assists them in becoming successful. His occupation is a college professor and he is 85 y.o., never sick a day in his life. He travels very frugally all over the world, yet never exults himself in any way. He owns a chicken farm and hired someone else to live there and manage it. He never wants for anything. He is amazing. I have learned a lot from him. Those who are wealthy and flaunt it, have a lot to learn. Warren Buffet is very frugal and yet if you met him, you would never know how wealthy he is. Being frugal allows them to have personal freedom and they can go anywhere and do anything and seem as normal as anyone else, because they are just people who happen to be wealthy. God bless them.

  3. I thought about The Millionaire Next door as soon as I started reading this article. Great points! If you haven’t read the book, its definitely worth it.

  4. Hey! That’s us! Except, we have been buying new cars lately (to replace cars that were paid off long ago and >15 years old). I did an analysis on new vs. used, and for us it made sense. We are easy on our vehicles, maintain them well, and rack up very low mileage. Because of this, we aren’t very interested in used cars because most owners are not as meticulous as we are. We also buy make’s that have low depreciation, so a 1-2 year old car is still holding it’s value. Hence, why buying used doesn’t make sense to us. We also buy cash through fleet dealers for invoice. If they’re offering 0% financing, we take it and make money on the money in the meantime.

    We also vacation on the cheap, always staying somewhere with a kitchenette and making our own meals (except for one or two special dinners).

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