Frugal Spending Habits of Millionaires

As a contrast to high earners who can't control their spending, here's a post on the frugal spending habits of millionaires. The highlights of how rich people spend:

• 8% shopped at Goodwill stores
• 20% used coupons
• 64% said they lived in a modest, middle-class home
• 28% mowed their own lawn to save money
• 44% only purchased used cars
• 19% managed their investments themselves – they did not use financial advisors in order to save money
• 60% said they were frugal with their money
• 81% used credit cards that offered reward dollars. This way they could get something for free
• 41% spent less than $3,000 on their annual vacation

Some good stuff to comment on here:

• We've shopped at Goodwill and similar stores. You can get some good stuff there at great prices, though it's a bit hit and miss and you have to dig for the values.
• The not only use coupons but probably stack multiple discounts and ask for better prices.
• Buying a house you can afford is a big key to becoming wealthy. Doing so helps you pay off your mortgage early which limits the downward drag of debt. It also helps you control tons of other expenses related to home ownership. This is why the house you buy determines your wealth.
• We've never paid anyone to mow our grass. Either I've done it or my son has. It saves money plus gives some good exercise. Thankfully we have a small yard now anyways.
• I deviate from many millionaires on cars since I buy new. But I get great deals on new cars and drive them forever.
• I manage my money myself. Heaven forbid I'd use a financial advisor!!!
• We are moderately and selectively frugal. You don't have to re-use toilet paper and make your own toothpaste to save money. If you have a good enough income, you have plenty of room to spend AND save.
• I certainly use credit cards for cash back and make a good amount each year doing so. Now that my daughter is off to college, we're paying her tuition with credit cards and earning a fortune.
• We spent less than $3k on vacations for years (we simply went to see relatives when the kids were young). Once the kids got older, we went on a few cruises and have traveled much more.

So, that's how I stack up to the habits. Do you identify with any of these?

Comments

[YAH]

• Live in a $300K condo . . . pricy but at the very bottom of the market in La Jolla, CA.

• Own a pristine, used Toyota with only 12,000 miles. Waited a week after seeing it, wherein the owner dropped the price $1,000, and then purchased it.

• Invest online with Vanguard.com, which is easy and has very low fees and a terrific reputation, to stash funds in an S&P-based index fund with a "target retirement date" of 2030. The fund automatically adjusts its stock-bond ratio, growing more conservative (i.e., fewer stocks, more bonds), as one approaches the retirement date.

• Am aware of 'spending vs. earning' ratios and stay within a certain, rough range each month, i.e., am "frugal" in that outgo is far, far less than income.

• Use a 2% cash-back Citibank credit card; the refunds are applied to the balance.

• Live in a seaside resort town -- so never have to GO on vacation as am already there. Take "daycations" every other day, versus only two weeks a year.

It's not just about being "frugal," however:

• Additionally, I have a rental property that pays (the property tax and maintenance fees) for itself, the condo I live in, and two other homes. All four properties are appreciating in value currently.

• Also, I have royalty income of $3,000/year coming in from an Etsy-type site and am devloping this further as it's fun and basically pays for a free lunch each day.

• Most importantly for the long run: I look forward to the massive effects of 8% (guestimate) compounding of retirement investments in 20 or 30 years. Will quadruple my current net worth with no effort, barring a black swan event or twelve.

[Mrs. Picky Pincher]

I do wonder how these people define the word "frugal," though. It's kind of like asking someone if they're a good driver; everyone will say yes, but we know what the truth is. ;)

[Dan]

Great goals to work towards achieving. I've got some of these down, but admittedly need to work on a few. The only one I think I might disagree with is vacations. I'm not a fan of overpriced Disney/Hawaii tourist traps, and one doesn't have to stay at the Ritz, but I think world travel is incredibly important. I could be much better off now if I hadn't traveled so much in my 20s/30s, but I wouldn't trade those experiences for anything.