8 Best Money-Saving Tips from Self-Made Millionaires
Saving money can be the difference between stressing to dress and dressing to impress. It can help you retire younger to see more of the world sooner. It can mean building that dream house. And more than anything, it can mean having the money when you need it, and resting assured that you have it even for those times you don’t.
As counterintuitive as it may seem, nine-time New York Times bestselling author David Bach recommends forgoing a budget. “You’re too busy, and you will just get frustrated and fail,” Bach, the founder of FinishRich.com says. “Instead automate your financial life. When it’s automatic you can’t fail.” That includes having your paycheck automatically deposited, along with a regular 401(k) contribution. He also recommends automating all your bills, including car payments, mortgage payments, and credit card bills. Find out the 10 traits that make you more likely to become a millionaire.
Avoid “want spending”
The term “want spending” is something Tom Corley, an expert on wealth creation, highly advises you avoid. “According to Census Bureau data, there are approximately 30 million people who make more than they need, but who are, nonetheless, one paycheck away from poverty,” Corley explains. “These individuals engage in something called want spending. Want spenders spend more money than they make on their wants.”
Are you a want spender? Some of the biggest indicators, according to Corley include:
Surrendering to instant gratification, forgoing savings in order to buy things you want now, be it 60-inch TVs, nice vacations, expensive cars, or a fancy pair of shoes
Spending too much going out to eat or ordering in
Incurring debt in order to finance your standard of living
Essentially, “want spenders” create their own poverty by rationalizing their desire to spend in various ways, whether it be making more money in the future or relying on the economy improving down the line. Here are some quick ways to earn extra cash.
Don’t lend money to friends or family
Your love for your family and friends shouldn’t be measured by your generosity, but sometimes that’s exactly what it comes down to. If you don’t do it, there can be tension, and if you do do it, you may never get the funds back and find yourself resenting them. “You will lose both your friend and the money, and you’re not a bank,” advises Bach.
Say you do lend them money. Did you come up with an agreement for a timeline for repayments? When it comes to friends or family, setting such boundaries can be difficult, but it’s even more awkward to continuously ask for the money back.
If you absolutely must lend money to someone near and dear, make sure the loan isn’t open-ended. Come up with a timeline, and stick to it. You can also take advantage of companies that specialize in peer-to-peer lending, like Virgin Money US, which formalizes loans between family members and friends. Here’s what three different billionaires have to say about the importance of communication.
Be a smart spender
It goes without saying that stupid spending is a thing. We’ve all done it and likely felt guilty about it. No, you didn’t need the trucker hat at the gas station on your long, boring road trip. And yes, stuff like that, when made a habit, adds up. Corley dug deep into the idea of smart spending in his Rich Habits Study and found that there are specific strategies that can ensure you fall into the smart spending category.
In his research, he discovered:
- It’s best to buy in bulk. “If done properly, and with the right items, buying in bulk can save your household money and reduce waste,” he says. Toilet paper, soap, laundry detergent, paper towels, and shampoo are items proven much cheaper when bought in larger sizes. Prioritize food items like applesauce, canned goods, or yogurt, which can be portioned into glass jars and saved for future use.
- Get on a meal plan. “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,” says Corley. “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,” he explains. This can be as simple as swapping incandescent bulbs for CFLs or LEDs to lower your utility bill.
Check out this list of 19 smart tricks for spending less money on groceries.
Pay yourself first
Bach says this is one of the most important steps to building wealth. “Pay yourself first at least an hour a day of your income,” he urges. “You’re going to work 90,000 hours over your lifetime; You should keep at least an hour a day of the income.” The next step is to save and invest it, preferably automatically as Bach previously mentioned.
Avoid lifestyle creep
According to Corley, self-made millionaires make sure to avoid increasing their standard of living in order to match their increased income. “It’s a common habit among many who suddenly find themselves making more money,” he says. Your best bet? When the desire to spend your money hits, focus instead on putting it away into savings and investments that grow in value and provide financial resources you can utilize down the road 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.”
Be frugal, not cheap
In Corley’s study, he found that 66 percent of the poor admitted to being cheap. “Cheap to them meant spending their money on the cheapest product or service available,” he explains. But cheap products break or deteriorate at a much quicker rate than quality products.
He also points out that, when looking for services, those who provide cheap ones are typically inexperienced or not very good at what they do. “If they were good, they would be able to command higher prices. Cheap service providers can get you in a lot of trouble, especially when it comes to taxes, legal representation or even just getting your car fixed. Cheap service providers are able to keep their fees down by paying their staff lower wages. This means they are not getting the best staff or are settling for inexperienced staff.”
While being cheap won’t necessarily make you poor, it will mean you keep less of your money as a result of the low quality you are left with in exchange for your money. These money-saving myths are actually making you poor.
Never give up
Maybe it sounds cliché, but it’s the type of mindset that will keep you above water. “No matter what happens, no matter how many times you fail as long as you get up and try again you haven’t lost,” says Bach. Read on for more suggestions on how to achieve a financial goal.