In Part I I covered one of the main strategies almost anyone can use to create an amount of wealth that will make you feel as if you are “wealthy” – Being frugal with your spending in order to reduce the cost of your standard of living to 80% or less of your net pay.
In this article, I’ll share how the Saver-Investor Millionaires in my study spent their money:
- Housing – 25% or Less of Monthly Net Pay – For most, a home or apartment is the most expensive part of the spending budget. When you keep the size of your home or apartment small, it will reduce how much you spend in mortgage interest, rent, real estate taxes, repairs, utilities and insurance. Strive to keep your housing costs below twenty-five percent of your monthly net pay.
- Cars – 5% or Less of Monthly Net Pay – Car expenses include monthly car payment, car insurance, gas, tolls, registration fees, repairs and maintenance.
- Clothing – 5% of Less of Monthly Net Pay – Many Goodwill stores carry high quality clothing. You may have to spend a few extra bucks on tailoring, but it is well worth the additional cost.
- Vacations – 5% or Less of Monthly Net Pay – The Saver-Investor Millionaires in my study did not go on exotic vacations. They took modest, inexpensive vacations. They found bargain vacation deals for their family. Some purchased rental properties in beach towns, skiing area, lakes and spent their vacations in those homes.
- Entertainment – 10% or Less of Monthly Net Pay – This category includes bars, restaurants, movies, music, books, gifts, etc. Eating out and any prepared food you purchase is part of your entertainment budget.
- Stick to BYOBs – There are many restaurants that do not sell alcohol, beer or wine and allow you to bring your own spirit of choice into their restaurant. Restaurants markup liquor sales by as much as one hundred percent, so BYOBs save you money.
- Bargain Shop – Far too many make spontaneous purchases, paying much more than they otherwise would. That’s a Poor Habit. Shopping for bargains and taking advantage of sales events are smart money habits.
- Use Coupons – Even the wealthy in my Rich Habits Study engaged in this money savings habit. Thirty percent of the rich in my study used coupons to buy food. Why pay more than you have to on groceries or other expenses?
- Never Gamble – Gambling is high-risk speculation. It is a tax on the poor. However, if you like to gamble, this would come out of your Entertainment category of spending.
Getting control of your spending is not an easy task. Once it becomes a daily habit, however, it gets much easier. You will fall into a pattern and a routine that will keep you out of the poor house, enable you to save and puts you on the path to financial independence.