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.
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!
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.
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!
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.
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.
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.
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?