Live Like a Millionaire
If you’re like most of us, you probably plan to budget. You tell yourself when you earn money that you’ll save it, rather than spend it. But it’s easier said than done – without a plan, you can easily find yourself on the final ten dollars of your most recent paycheck, wondering what happened to the rest of that cash and your hopes of saving it.
It’s not the greatest feeling. Wouldn’t you rather avoid it?
In my five-year study on the daily habits of wealthy people I uncovered certain things the wealthy do to create, maintain or grow their wealth.
The 80:20 Rule
This rule requires that you set aside 20% of every paycheck and learn to live off the remaining 80%. You do this no matter how much money you make. If you get a raise or bonus, set aside 20% of that raise or bonus in addition to the 20% of your regular pay. If you stick to the 80:20 Rule you will save a lot of money and you will be wealthy long before you reach retirement age. You will be one of the few among your friends and colleagues because, unfortunately, most parents don’t teach their kids the importance of saving, so nobody saves.
Budgeting & Saving
Below are some guidelines regarding budgeting and saving:
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Don’t spend more than 25% of your monthly net pay on housing.It doesn’t matter if you own or rent. Stick to this 25% rule.
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Don’t spend more than 10% of your monthly net pay on entertainment. This includes bars, movies, restaurants etc.
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Don’t spend more than 5% of your monthly net pay on auto loans and never lease. Leasing is something I call a Poverty Habit. Buy your cars and take good care of them.
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Stay away from accumulating credit card debt. If you are doing this it means you are living beyond your means and you need to cut back on something.
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Always invest your savings prudently. Never gamble your savings on get rich quick schemes. There’s no such thing. The power of compounding can grow your savings and make you wealthy. Saving just $250 a month over 40 years will produce $500,362 at a 5% return.
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Max out your contributions to the company retirement plan. If the company matches your contributions, great. That’s free money. Always take free money when you can get it.
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Know what you spend every month. Create a monthly budget and track what you spend.
Most of the wealthy don’t make a lot of money. But they do save a lot of money. They make a habit of saving until it hurts. They focus on accumulating wealth through savings.
Savings and investments are two different things. Your savings should never lose money, whereas your investments represent a portion of savings that you are willing to put at risk and lose. How much you take out of your savings and invest depends on your risk tolerance. Conservative wealthy people do not put any of their savings at risk. Moderate wealthy people put 25-50% of their savings at risk. Aggressive wealthy people put more than 50% or more of their savings at risk.
If the wealthy invest part of their savings, they typically invest it in one or more of the following:
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Their businesses and their retirement plans.
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Guaranteed products like variable annuities & life insurance.
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Stocks, real estate investments, or gold.
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Education for their children.
Accumulating wealth is not about hitting it out of the park. It’s about getting singles. You get enough singles and you win the game.
In my five year study on the daily habits of the rich and the poor, when it came to money, there were significant differences between the two groups. Let’s take a look at some of the research:
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67% of the wealthy said they are frugal with money.
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8% of the wealthy shop at retail thrift stores.
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85% of the wealthy in my study stated that they have always believed that no matter what, an individual can always save money if they really want to. Only 2% of the poor share this opinion. 73% of the wealthy in my study were taught the 80:20 Rule by their parents.
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6% of the wealthy lease cars. Conversely, 45% of poor people lease cars. Leasing a car is a Poverty Habit. Wealthy people don’t lease cars. They purchase their cars and will drive them as long as the engine holds out.
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16% of the wealthy gamble on sports at least once a week vs. 52% of the poor. 9% of the wealthy play the lottery every week vs. 77% of the poor.
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100% of the wealthy save for retirement vs. only 19% of the poor.
The research speaks for itself. It’s not hard to accumulate money. On the contrary, it can be very easy! Living like a millionaire doesn’t have to involve earning six-figure sums. Like anything worth earning in this world, it just involves planning and commitment. You save, and you save, and you save, even if it hurts. It’s a lot harder to commit to saving than it is to not and say you did. But with these tips under your belt, you’ll hardly feel the difference – just the rewards.
**Edited for Repurpose by Amy Kisaka, staff writer with Goddess Connections.
Thomas C Corley
Thomas C Corley is a Certified Public Accountant, Certified Financial Planner, has a Masters in Taxation and is certified by the Corporation for Long-Term Care. He is President of Cerefice & Company, a CPA firm, and is the CEO of The Rich Habits Institute, an organization that offers Rich Habits training, seminars and education learning sessions. Thom has authored several books including his revolutionary self-help book “Rich Habits” and “The Top 100 Cheapest Places to Retire in the U.S.” book series. He also trains businesses, individuals, and students how to be financially succcessful in life through his Rich Habits education programs - www.richhabits.net.