Think the super rich spend their money freely on anything they want? Think again.
10 frugal lessons to learn from the super wealthy
Being a billionaire or a millionaire isn’t all you think it’s cracked up to be. MoneyTalksNews.com put together a review of some of the frugal habits of the world’s wealthiest people.
1. Stay in your starter home
Be like billionaire investor Warren Buffett. The Oracle of Omaha still hangs his hat in the same five-bedroom home he bought in 1958 for $31,500.
No multimillion dollar mansion for him!
2. Keep your wardrobe costs low
Think about Facebook billionaire Mark Zuckerberg. What’s he wearing whenever he’s photographed? A gray or black T-shirt, jeans and sneakers — with an optional hoodie.
No fancy threads for this social media boy wizard!
3. Don’t be afraid of coupons and sales at the grocery store
Actress Sarah Michelle Gellar (Buffy the Vampire Slayer) and husband Freddie Prinze Jr. find ways to save even when they’re shopping at an expensive grocery store.
“We shop at Whole Foods, but we ask which fish is on sale,” she tells Self. “On sale doesn’t mean it’s bad! It probably just means it’s overcaught. And I clip coupons all the time. Why should you pay more for something that someone else is paying less for?”
4. Find small ways to save
Ever heard the saying, “When not in use, turn off the juice?”
Well, imagine it being said in an English accent…in Buckingham Palace…by Queen Elizabeth II.
The monarch reportedly insists lights get turned off when not in use and also routinely reuses wrapping paper after royal gifts are opened.
5. Repeat step #4!
Billionaire Ikea founder Ingvar Kamprad is another great example of how maintaining frugal spending habits can lead to long-term wealth.
“I don’t think I’m wearing anything that wasn’t bought at a flea market,” Kamprad is quoted as saying.
But he doesn’t stop at cheap clothes. He also apparently prefers inexpensive haircuts.
“Normally, I try to get my haircut when I’m in a developing country. Last time it was in Vietnam,’ Kamprad said in a 2008 interview.
Worth an estimated $40 billion, Kamprad has attributed much of his company’s success to these types of penny-pinching habits.
6. Drive an old used car
Robert Morin was a librarian at the University of New Hampshire who left a $4 million fortune to his beloved school when he passed away in 2016 at age 77.
Here was one of the keys to his wealth: No shiny new wheels! Robert drove a 1992 Plymouth and likely would have continued to until the wheels fell off.
Sounds like Robert probably understood the true costs of car ownership. One recent estimate put that cost at nearly $79,000 over 15 years — and that was for an economy car like a Mazda 3.
Need another reason not to drive a new car? Depreciation.
Simply put, depreciation means that when you buy a new car, the value drops like a rock the minute you drive it off the dealer lot. The smart money knows it’s far better to let someone else take that hit upfront and to buy a used vehicle instead!
Read more: How to buy a used car
7. Never pay for parking
Robert Morin isn’t the only millionaire on this list that you’ve probably never heard of.
Ronald Read, a Vermont-based janitor, quietly amassed a fortune of nearly $8 million before his death in 2014.
“You’d never know the man was a millionaire,” his lawyer, Laurie Rowell, told Reuters. “The last time he came here, he parked far away in a spot where there were no meters so he could save the coins.”
Hmm. Not paying for parking. That sound like something we’ve heard before.
There’s another very rich man who doesn’t like to pay for parking. What’s his name? Oh yeah, it’s Clark Howard!
8. Live on less than you make
This tip is pretty much ground zero for anyone who wants to be wealthy one day.
Just ask onetime Detroit Lions wide receiver Ryan Broyles.
Though Broyles had a $3.6 million contract, he and his wife lived on just $60,000 per year, according to MarketWatch.
For Broyles, that meant 50% on fixed expenses like mortgage and car payments; 30% toward variables like food and gas; and 20% toward savings.
9. Seek out low-cost investments
Here on Clark.com, we’ve brought you the story of Justin McCurry who managed to take early retirement at 33 because he stashed away $1.4 million.
Initially, Justin and his wife started investing with Edward Jones — a full service brokerage firm. But after a few years, they made the switch to Vanguard and Fidelity.
“We have saved close to $40,000 on investment expenses by switching to a low cost provider,” he says. “That’s a year or two of living expenses!”
A new study from BuyUpside.com shows that just a difference of 1% in annual fees can mean an $80,000 difference in retirement.
Here’s how the math works. Let’s say you invest $100,000 today with a 5% annual return and you pay 1% in annual fees. In 30 years, you would have $319,694.
Now let’s say you invest $100,000 today with a 5% annual return and you pay 2% in annual fees. In 30 years, you would have $235,755.
Paying what seems to be a measly 1% more in fees (2% instead of 1%) eats an $80,000 hole in your retirement plan! What seems inconsequential in the here and now actually has a huge effect on your future wealth.
10. Always keep learning
Author Tom Corley writes in his book “Change Your Habits, Change Your Life” that 58% of the self-made wealthy people he surveyed read biographies of other successful people.
Want to save even more money as you read yourself to wealth? Get those books from your local library!
Read more: Best discount investment brokers of 2017