Being Frugal is a Rich Habit

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I am often asked by the media if, in my Rich Habits Study, I found any evidence that the wealthy were frugal or cheap. For some reason, they like to lump these two traits together as if they were one in the same. They are not. Being frugal is very different from being cheap.

What it Means to Be Frugal

Sixty-seven percent of the rich in my study said they were frugal. To them, frugal meant spending their money wisely. It meant buying quality items or services at bargain prices. Most of the wealthy in my study were raised by poor parents or middle-class parents who made a point of instilling in them good habits. Being frugal was one of those good habits they learned from their parents and that they took with them into their adult lives. Looking for value and quality makes you frugal.

When it came to clothing, for example, 8% of the wealthy in my study shopped at Goodwill stores, in search for brand name, high quality clothing at a deep discount. This often required the additional cost and aggravation of getting their Goodwill clothes tailored, but, to them, it was well worth it. They were getting the best clothing at prices Walmart couldn’t offer.

Another example of their frugal spending patterns was how the rich shopped for groceries. Thirty percent admitted to regularly using coupons to buy their groceries. And they also liked to buy their groceries in bulk at places like Costco and Sam’s Club.

When it came to credit cards, 81% of the wealthy used only credit cards that offered reward points or dollars. They would then use their reward points or dollars for travel, gift cards, to buy coffee, etc. Rewards they accumulated on their credit cards, as far as they were concerned, was free money. Who doesn’t like free money?

And when it came to banking, 38 of the millionaires in my study, or about 16%, chose credit unions over traditional banks. Why? They were frugal and credit unions, to them, offered superior personalized service at a bargain price. They liked the fact that the banking personnel seemed more committed to helping them with their banking needs, that there was little turnover and this meant they were able to develop long-term relationships with the tellers and bankers. Seeing the same faces, year after year, was comforting. Relationships, after all, are the currency of the wealthy.

The wealthy were also frugal when it came to purchasing cars. Forty-four percent only purchased high-quality used cars. Typically, these were cars coming off two or three year leases. According to Kelly Blue Book, new cars lose as much as 25-30% of their value in the first two years. That’s a big discount for a quality vehicle purchase.

What it Means to Be Cheap

Sixty-six percent of the poor in my study admitted to being cheap. Cheap to them meant spending their money on the cheapest product or service available.

Being cheap is a Poor Habit because quality is very rarely given any consideration at all. They need X, so they look for the cheapest X they can find.

Being cheap is one of those taxes the poor pay that the rich don’t. Cheap products break or deteriorate at a much quicker rate than quality products. Quality products can last for a lifetime.

Those offering cheap services are often 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.

Being frugal will not make you rich, but it does mean you will keep more of your money as your purchases are driven by quality and price. Being cheap will not make your poor, but it does mean you will keep less of your money due to the low quality you receive in exchange for your money.

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Thomas C. Corley About Thomas C. Corley

Tom Corley understands the difference between being rich and poor: at age nine, his family went from being multi-millionaires to broke in just one night, due to a catastrophic fire that destroyed his Dad's thriving business. For fourteen years they struggled with poverty. There were eleven in Tom's family, and they lived in constant fear of losing their home.

Driven by the desire to unlock the secrets to success and failure, Tom spent five years studying the daily activities of 233 rich people and 128 poor people. He discovered there was an immense difference between the habits of the rich and the poor. During his research he identified over 300 daily activities that separated the “haves” from the “have nots.” Tom decided to write a book to share what he learned. That book, Rich Habits: The Daily Success Habits of Wealthy Individuals (1st Edition), went on to become an Amazon Bestseller in the United States forty times over a three year period. To give you some perspective, in order to be a true Amazon Bestseller in the United States, where you actually receive a specific Bestseller designation from Amazon, you need to be in the top 100 of all books sold by Amazon in the United States in a given day. Rich Habits did that for nearly thirty straight days, rising as high as #7, eclipsing such Bestselling authors such as Stephen Covey, Robert Kiyosaki and J.K. Rowlings. Imagine that - an unknown, first-time, self-published author selling more books than J.K. Rowlings!

Tom now travels the world, sharing his Rich Habits and motivating audiences at industry conferences, corporate events, universities, multi-level marketing group events, and global sales organizations’ presentations and finance conferences. He has even spoken on the same stage with famous entrepreneurs and personal development experts, such as Sir Richard Branson, Robin Sharma, Dr. Daniel Amen, and many others.

Tom has shared his insights on various national and international network, cable, and Internet television programs such as CBS Evening News, NBC News, Yahoo Financially Fit, Money.com, India TV, News.com Australia, and a host of others. He has been interviewed on many prestigious nationally syndicated radio shows, including the Dave Ramsey Show, Marketplace Money, and WABC.

Tom has been featured in numerous print magazines—such as Money magazine, Inc. Magazine, SUCCESS Magazine, Entrepreneur magazine, Fast Company magazine, More magazine, Epoca Magazine (Brazil’s largest weekly) and Kiplinger’s Personal Finance magazine—and various online publications, including USA Today, CNN, MSN Money, SUCCESS.com, Inc.com, and the Huffington Post. Tom is a frequent contributor to Business Insider, Credit.com, Bankrate.com and a few other media outlets.

National publicity has garnered international media attention for Tom and his Rich Habits research spanning 23 countries. Broadcast media, online publications, and television throughout Asia, the South Pacific, Europe, the United Kingdom, and Central and South America have shared his powerful message.

In an effort to help parents, grandparents, teachers and adults become success mentors to the younger generation, Tom released his second book, Rich Kids: How to Raise Our Children to be Happy and Successful in Life in 2014. This book was the self-help category winner of the 2015 New York Book Festival and Runner-up in the prestigious 2015 Writer’s Digest Self-Published Book Awards Contest. In 2016 Tom released his third book, Change Your Habits, Change Your Life. This book provides the latest science on habit change as well as more of Tom's unique research on the specific habits that helped transform 177 ordinary individuals into self-made millionaires.

Besides being an author, Tom is also a CPA, CFP, and hold a master’s degree in taxation. As president of Cerefice and Company, CPAs, Tom heads one of the premier financial firms in New Jersey.
 
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