Welcome to this post about money habits of millionaires!
Movies, books, songs. Whenever we watch movies, there’s always going to be that millionaire who’s wearing designer suits, flashy shoes, and expensive jewelry. Whenever we read books, the words describe rich people who have huge mansions and are arrogant and snobby. And, whenever we listen to songs, we hear the words gold, chain, money, cash, and more words that can’t get out of our head after we listen to a certain tune.
However, think of Bill Gates, Warren Buffett, Mark Zuckerburg, and more. In fact, go search them on Google right now. Do you see them in fancy suits? Do you see expensive jewelry wrapped around their necks and arms? Well, I don’t see any sign of extravagance or showiness with the sight of them. Modern life has defined a millionaire with an unreasonable sense of owning expensive items and being arrogant.
While I know that some millionaires may own flashy items and may have a haughty personality, that does not make all other millionaires the same way. Each and every individual have their own desires, definition of luxury, and personality type. This post is not about the different types of millionaires, but in fact about the money habits of millionaires.
If all millionaires were to be attracted to Gucci shoes and Ferraris, then the number of millionaires today would be much less. While each person has their own bank accounts, budget, and finance tips, there are some common money habits of millionaires that are very helpful for living a comfortable life.
Living a millionaire life is different than actually being a millionaire. The definition of millionaire is simply a person whose assets are worth one million dollars or more. Anyone could buy designer clothes and own expensive cars, even if they weren’t a millionaire. The only problem is that their finances would be in trouble. Just take a look at the picture below from this article.
Moving forward, this post is all about money habits of millionaires that help them live a comfortable and successful life. Everyone has their own ways of accumulating wealth, but these tricks can help everyone, regardless of financial status. If you want to be wealthy, follow these tips. And, if you want to stay as wealthy as you are right now, follow these tips! So, without further ado, read on to see the money habits of millionaires!
1. Start saving from an early age
Ninety-four percent of the self-made millionaires who became rich by saving money saved 20% or more of their net pay or their net income. They did this early in their work lives, long before they accumulated their millions.
With your first paycheck, get into the habit of saving something — 10% or 5% or even just 1%. The point is to set some savings goal and stick with it. This creates the savings habit. The ultimate goal, if you want to become a self-made millionaire, is to save 20% or more or your net pay and prudently invest those savings. Through the power of compounding, your savings and investments will grow over time.
www.businessinsider.com
2. Be frugal
Frugality — a commitment to saving, spending less, and sticking to a budget — is one of the wealth factors that help millionaires build wealth, according to Sarah Stanley Fallaw, the director of research for the Affluent Market Institute and an author of “The Next Millionaire Next Door: Enduring Strategies for Building Wealth,” for which she surveyed more than 600 millionaires in America.
Many of the millionaires Stanley Fallaw interviewed stressed the freedom that comes with spending below their means.
“Spending above your means, spending instead of saving for retirement, spending in anticipation of becoming wealthy makes you a slave to the paycheck, even with a stellar level of income,” she wrote.
businessinsider.com
3. Avoid lifestyle creep
‘Lifestyle Creep‘ is increasing your standard of living in order to match your increased income.
It’s a common habit among many who suddenly find themselves making more money. The Rich Habit is to forgo the desire to spend your money today and, instead, sock it away into savings and investments that grow in value and provide financial resources that can be used in the future to maintain your standard of living.
Once you spend your money, it’s gone. When you hit a bump in the road, such as a job loss, you are then forced to sell your stuff. If the stuff you purchased depreciated in value, you get pennies on the dollar.
businessinsider.com
4. Keep expenses low
Self-made millionaires who made their millions by saving money were fanatics when it came to keeping their expenses as low as possible. Here are some of the strategies to follow:
• Don’t spend more than 25% of your monthly net pay on housing. It doesn’t matter if you own or rent.
• Try not to spend more than 15% of your net monthly pay on food.
• Don’t spend more than 10% of your monthly net pay on entertainment. This includes bars, movies, restaurants etc.
• Don’t spend more than 5% of your monthly net pay on auto loans or auto leases.
• Try not to spend more than 5% of your net annual pay on vacations.
• Never gamble. If you’re going to gamble on the lottery, it comes out of your entertainment budget.
• Stay away from accumulating credit card debt. If you are using credit cards to meet your living and household expenses, by definition you are living above your means.
• Always invest your savings prudently. Never gamble your savings on get rich quick schemes. There’s no such thing. The power of compounding can grow your savings and make you wealthy. Saving just $250 a month over 40 years will produce $500,362 at a 5% return.
• Max out your contributions to your company retirement plan. If the company matches your contributions, great. That’s free money. Always take free money when you can get it.
https://www.businessinsider.com/self-made-millionaires-habits-build-wealth-2017-9#3-they-avoid-lifestyle-creep-3
5. Add a side income
Many millionaires favor moonlighting, or taking on a side hustle, according to Stanley Fallaw, who said it’s a good way to explore options while remaining employed full time.
“Those who are able to create multiple opportunities to generate revenue, who can translate hobbies into income-producing activities, will be successful at becoming millionaires next door in the future,” she added.
John also found that millionaires develop multiple streams of income, enabling them to grow their net worth exponentially, he said.
businessinsider.com
6. Budget
Your budget is your plan. And you can’t build a million-dollar net worth without a plan, people. Success isn’t an accident. You are in charge of your own wealth-building.
Just like you build a house by starting with the foundation, you build wealth by starting with the budgeting basics. And then you keep following them. When you’re making a lot of money, you don’t stop managing it, right?
Average millionaires have made a habit of budgeting every month. They know what’s coming in and what’s leaving their bank accounts. If you only remember one thing, it should be this: Budgeting is the key to winning with money. It’s telling each dollar where to go at the beginning of the month instead of wondering where it all went.
https://www.daveramsey.com/blog/habits-of-millionaires-and-billionaires
7. Avoid debt
One of the biggest myths out there is that average millionaires see “debt as a tool.” Not true. If they want something they can’t afford, they save and pay cash for it later.
Car payments, student loans, same-as-cash financing plans—these just aren’t part of their vocabulary. That’s why they win with money. They don’t owe anything to the bank, so every dollar they earn stays with them to spend, save and give!
Debt is the biggest obstacle to building wealth. I tell everyone. You need to avoid it like the plague. Your dreams are too important!
https://www.daveramsey.com/blog/habits-of-millionaires-and-billionaires
8. Make your money invisible
If you’re anything like me, whenever you see money, you’re tempted to spend it all immediately. We think, “Wow, I have this much money. Why not spend it on new shoes?”
However, that is exactly what millionaires do NOT do. They don’t feel the need to spend money on something just because they know they have money. If that was so, millionaires would be much less rich now. Instead, millionaires make their money invisible. This means putting it away to work for you because you see it in your checking account.
Open up a savings account. Every time you get paid, immediately move a specific amount of your net pay into the savings account. This will force you to spend only what you have in your main checking account.
https://www.businessinsider.com
9. Have smart spending strategies
The self-made millionaires in my Rich Habits Study were smart in spending their money.
Here are some of the smart spending strategies I discovered in my research:
- Buy in Bulk – If done properly, and with the right items, buying in bulk can save your household money and reduce waste. Nonperishables, such as toilet paper, soap, laundry detergent, paper towel, and shampoo, can be enormously cheaper if you buy them in bulk. Even some food items bought in bulk, such as applesauce, canned goods, or yogurt, can be portioned into glass jars and/or saved for future use.
- Plan Your Meals in Advance – Food is one of the largest expenses in a household, after housing, transportation, and personal insurance, according to data from the Bureau of Labor Statistics. The easiest way to fastidiously enforce your food budget is to plan your meals in advance. If you can sketch out a menu for the week that utilizes similar ingredients, you’ll have a more focused trip to the grocery store and you’ll end up throwing less away weeks after it’s been shoved to the back recesses of the refrigerator. Instead of running to the store and perusing potential ingredients, look in your refrigerator first and use that information to decide your next meal. Making a conscious effort here saves you money and it keeps food waste out of landfills.
- Reduce Energy Costs – Lowering your energy consumption is a low-hanging fruit when it comes to cutting monthly expenses. The small changes of swapping incandescent bulbs for CFLs or LEDs can save you money on your utility bill, plus LEDs last roughly 25 times longer than traditional bulbs, dramatically cutting replacement costs. Even while they’re turned off, plugged in electronics continue to pull energy. To stop the drain, plug your TVs, computers, and other devices into power strips that can be easily unplugged when not in use. Cut back on water usage by taking shorter showers, washing only full loads of laundry, and using your dishwasher if you have one — doing dishes the old-fashioned way can use 6 to 12 gallons more.
This section came from propertyupdate.com.
10. Give back
While you may have a huge mansion to live and enjoy in, some people don’t even have a roof over their heads. While you may experience different foods and flavors from different places, some people don’t even get a meal in a day. And, while you may be able to smile and laugh with family and friends, many people do not get that blessing.
Sure, some rich people can be selfish jerks—just like anyone else. But the everyday millionaires who live down the street, the ones you don’t even realize are wealthy, are some of the most giving people you’ll ever meet. I know because I’ve met a lot of them. They work hard, save and respect the ability of others to do the same.
Whether it’s tithing at church, donating to a charity or just giving to friends and family, these people have generous spirits. They realize that the most important thing you can do with wealth is help others.
That’s actually why they continue building their wealth. They realize they can’t take it with them when they die. Instead of spending it all on the latest toys, they choose to leave a legacy for the people who mean the most to them.
https://www.daveramsey.com/blog/habits-of-millionaires-and-billionaires
The Takeaway
Even though everyone wants to be a millionaire, the purpose of life is not just to achieve that. Life is full of both smiles and tears, happiness and sadness, and success and failure. Being successful in life doesn’t mean becoming a millionaire; you are successful as long as you find happiness in your life!
Despite being a millionaire or not, controlling your finances will be a part of your life no matter what. While money doesn’t buy happiness, it does allow you to live comfortably. As a recap, it would be wise to adopt these money habits of millionaires:
- Start saving from an early age
- Be frugal
- Avoid lifestyle creep
- Keep expenses low
- Add a side income
- Budget
- Avoid debt
- Make your money invisible
- Have smart spending strategies
- Give back
Now, I can’t guarantee that these habits will make you become a millionaire, but that’s not the purpose of these habits. These habits serve to help you live a comfortable and financially secure life! Along with adopting these habits, I highly recommend checking out the book: Millionaire Mindset: The Simple Habits and Thinking Behind Money, Wealth, and Success. Not only that, but for a quick resource, watch this video by Dan Lok: How to Manage Your Money Like the Rich.
Whether you aspire to become a millionaire or not, these habits are great habits to adopt to live a comfortable life. Good luck and I wish you all the best in your journey of financial freedom!
