There’s a common misconception that in order to become a millionaire, you have to have an annual salary in the high six figures. But if you study the majority of wealthy people, you’ll actually see that they earn moderate annual incomes and practice frugality.
The Secret Of Wealth Building
When most people think about a millionaire, they conjure up this fictitious image of a guy wearing Prada suits living in a Beverly Hills mansion with a five-car garage and personal chef. And while these millionaires do exist, they are the rare exception. These are the one percenters of the one percenters.
If you look at the average millionaire, the image is much softer. They live in comfortable houses, drive quality cars, and have everything they could possibly need – but they aren’t living in excess. In fact, they earned moderate salaries for most of their careers (with a few really good six-figure years mixed in).
Most millionaires achieve their wealth by living in moderation and steadily investing money over a 40-plus-year period. Don’t believe it? Consider this: A 20-year-old who steadily invests $305 per month into a retirement account that earns an average market return will have an account worth more than $1 million by the age of 63. (And for the record, that’s just 13.35 percent of a $2,288 monthly income.)
5 Tips For Living Frugally
If you’re like a lot of people, you can’t invest 13-15 percent of your monthly income into retirement each month. But this isn’t necessarily an income problem. It’s most likely a spending problem. You’re spending too much money on things that don’t matter, which cuts into your ability to save for the future.
In order to free up some room in your budget to invest and build wealth, you need to live a more frugal lifestyle. But let go of your preconceived notions of what it means to live frugally.
As RISE explains, “A frugal lifestyle doesn’t have to equal deprivation. At its core, frugal living is all about staying within your means and being careful with your money. The result? Less stress, more financial control and better overall well-being.”
Not sure where to begin? Here are some really practical and straightforward steps you can take:
- Move into a smaller house. Whether you rent or own, it’s possible that you’re living in a home that’s bigger than you need. By downsizing the square footage, or moving to a slightly less expensive neighborhood, you may be able to shave a few hundred dollars off your mortgage/rent in one fell swoop.
- Stop eating out. A lot of people waste their money on food. While it’s fun to eat out every now and then, you can save a ton of money by purchasing groceries and eating at home. For example, let’s say you currently spend $6 every weekday eating lunch at a fast food restaurant with your coworkers. That’s $30 per week – or $120 per month. By packing your own lunch, you could start investing this money.
- Get more use out of items. Clean your razor’s blade after each use. Flip and rotate your mattress every three months. Cook in bulk. By extending the use of everyday items, you can save money both now and down the road.
- Hang on to vehicles longer. People waste so much money on cars. They either constantly feel the need to upgrade to a new model, or they take out expensive car loans with outrageous interest rates and hefty payments. By paying cash for reliable cars and hanging on to them for more miles, you can save thousands of dollars per year.
- Shop with coupons and discounts. If you don’t shop with coupons and discounts, you’re missing out. Thanks to deal sites, coupon apps, and warehouse clubs, it’s possible to save money on almost anything if you spend enough time looking around.
Start Slashing Wasted Spending
Challenge yourself to reduce your expenses by 10 percent in the first month. If your expenses normally come to $4,000, this means spending just $3,600. If all goes well, you may want to reduce your expenses by even more the following month. You’ll eventually reach a happy medium where you feel like you’re living comfortably, yet being smart. For most people, this is where stress dissipates and happiness is cultivated.
If you are interested in even more lifestyle-related articles and information from us here at Bit Rebels then we have a lot to choose from.