Some personal finance gurus suggest that you shouldn’t clip coupons and pinch pennies if you want to save money. Instead, you should focus on increasing your earning potential to maximize your savings. However, self-made millionaires would disagree that frugality isn’t important.
Many of today’s millionaires built their wealth slowly over decades by investing regularly and living below their means. And even after becoming rich, they tend to stick to their frugal ways. Here are five financially prudent habits millionaires practice to build and maintain their wealth. We should all take a page out of their book and try out these money-saving tips!
5 Frugal Habits of Millionaires
They Eat Out Less
One of the biggest personal finance mistakes many Americans make is eating out frequently. The average person spends about $300 per month on restaurant meals. Restaurants mark up their food by an average of 300% to cover all their overhead costs such as labor and rent. Although grocery store prices have risen due to inflation, cooking food at home is still much cheaper than dining out.
Self-made millionaires eat out less frequently than the rest of us, enabling them to save and invest more. The National Study of Millionaires by Ramsey Solutions found that millionaires spend $200 per month or less on dining out. So if you want to have seven figures in your investment portfolio someday, you should consider cutting back on takeout.
They Use Coupons
Nearly 95% of millionaires regularly use coupons when they shop to get the best deal. Although each grocery coupon you use may only offer $1 or $2 off, those savings add up over time. In fact, estimates suggest that the average family could save $1,000 per year by using coupons effectively.
If you invest those savings in the stock market, you could add thousands of dollars to your portfolio thanks to the power of compound interest. Self-made millionaires never pass up opportunities to save money, even if it’s not a large discount. Because over time, even small amounts of savings can add up!
They Make Written Grocery Lists
Believe it or not, 85% of millionaires make a written grocery list before they go to the supermarket. Although they can afford to throw whatever they want in their cart, they still plan out their shopping trip ahead of time to avoid unnecessary impulse buys. This is prudent considering the average American spends a whopping $314 per month on unplanned purchases.
They Don’t Spend Extravagantly on Vacations
Travel is a huge expense for most Americans. In 2019, boomers planned to spend an average of $6,000 on vacations. Gen Xers and millennials weren’t far behind with plans to spend $5,400 and $4,400 on travel respectively. Experts say that vacationers will likely spend even more money on travel this year to make up for trips they missed during the pandemic.
Most millionaires have more modest travel plans. A recent study showed that nearly all millionaires spend less than $6,000 on vacations per year. About 40% of millionaires limit their travel expenditures to $3,000 per year or less.
They Invest Consistently
Three-quarters of millionaires from Dave Ramsey’s study agree that consistent investing is the key to building wealth. Eight out of ten millionaires surveyed invested in their company’s 401k plan. Plus, 75% of them made additional investments outside of their workplace 401(k).
Their investing strategy didn’t rely on single stocks, risky assets, or get-rich-quick schemes. They simply invested consistently in stable funds that provided slow and steady returns and watched their wealth grow over time.
They Read For Education
One thing you’ll find about millionaires is they are constantly educating themselves. Usually they’ll read at least a half an hour a day. They read usually practical topics related to business or self improvement. A good place to start would be to start reading personal finance blogs. Otherwise another good idea would be to pick up a good basic personal finance text – something like Personal Finance for Dummies, or start watching good basic personal finance videos. Khan Academy has a good series on this topic.
Do you practice any of these frugal habits? Are there any other money-saving tips we didn’t mention? Share your thoughts in the comments!
Read More
How Frugality Has Improved My Life
5 Habits Self-Made Millionaires Have in Common
How to Increase Your Chances of Becoming a Millionaire
How Much Interest Will I Earn on $1 Million?
Vicky Monroe is a freelance personal finance and lifestyle writer. When she’s not busy writing about her favorite money saving hacks or tinkering with her budget spreadsheets, she likes to travel, garden, and cook healthy vegetarian meals.