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.
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.)
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:
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.
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