It’s hard to save your way to wealth. It took the average millionaire in my Rich Habits Study 32 years to accumulate an average of $3.3 million. When asked about the importance of saving, 88% of those millionaires stated that it was critical to success.
Those who took the slow and steady path, whom I call Saver-Investor Self-Made Millionaires, used the power of compounding to grow their savings. Compounding means reinvesting the earnings from your invested savings, allowing your investments to grow over time.
The millionaires in my Study who pursued some dream and started a business, whom I call Dreamer-Entrepreneurs, used their savings as working capital, investing those savings in their dream. In my study, this approach took those millionaires just 12 years to accumulate an average of $7.4 million.
But one of the common denominators for both groups of millionaires was being frugal with their money. For the Saver-Investors, this frugality began the moment they received their first paycheck. For the Dreamer-Entrepreneurs, this frugality began the moment their dream began to create enough cash flow to enable them to begin saving and investing.
What does it mean to be frugal?
Being frugal requires three things:
- Awareness – Being aware of how you spend your money
- Focus on Quality – Spending your money on quality products and services and
- Bargain Shopping – Spending the least amount possible, by shopping around for the lowest price.
On its own, being frugal will not make you rich. It is just one piece to the Rich Habits puzzle, and there are many pieces. But being frugal will enable you to increase the amount of money you can save. The more you have in savings, the more money you can invest.
Having money set aside in savings, also allows you to take advantage of opportunities. Without savings, opportunities pass you by.