How to be a smart spender, a good saver, and still enjoy life
Last month I was contacted by a couple who wanted to get their finances in order. They were in their early ‘30s. Both ran their own businesses and seemed really nice – who doesn’t like working with fun people? They obviously were good at what they did. They were pulling in over a million dollars a year. But a little further into the conversation they admitted they had been spending pretty much all of it. They had some real estate and a little bit of savings but other than that, not much to show for it. Ouch. In a nutshell, they’d been working hard but playing harder. In their voices, I heard more than a touch of regret.
In the last article we looked at millionaires in general – how many there are, who they are, and how they came to be in the Big M club. This week I want to talk about what the specific things successful millionaires do to stay in the club so you can be in the habit of doing those same things. To be a successful millionaire, you gotta act like one.
It all begins with The Platinum Rule. Spend Less Than You Make. You have to make it a habit to save. Unlike the couple above, millionaires with staying power set aside a piece of everything they earn as savings. At a minimum they’ll save 10% of their income but generally they put aside a lot more than that. Right about now some of you are shaking your heads and saying I don’t make a million bucks; I barely make enough to pay my bills. How am I supposed to save 10% of that? I get it. Here’s how: start small but start now. If you can’t save 10%, save less. Start with 1% if you have to but start. The easiest way to start is to put the saving on autopilot. Don’t mull it over, fret about it, or put it on eleventeen different to-do lists. You need to simplify your life. Every day you have to make hundreds of decisions, right? Do I want to wear my black pants or my good black pants to work? The white shirt or the blue one? Do I want a frosted strawberry Pop Tart for breakfast or should I spring for an Egg McMuffin? Should I get gas now or can I wait until after lunch? See what I mean? No wonder we’re all stressed out.
Right now, pause reading and login to your bank account. Go to the tab for transfers and set up a monthly transfer from your checking to your savings account. If you can, set it up to transfer 10% of your income over but even 1% is better than zero. Do it now.
Congratulations. You just simplified your life by eliminating a decision and you acted like a millionaire. Do that regularly and you’ll be in the M Club before you know it.
Okay, moving on to the next habit. Be a smart spender. Millionaires are not impulse shoppers. Have a plan for your money and spend it according to your plan. If you don’t have a budget, now is the perfect time to start. You can use the Coin Budget Worksheet to create a budget and start tracking your spending. It will take a few tries to fine tune it but stay with it because it is worth it. When you know what you can afford, it’s easier to say no to stupid things you don’t need.
If the budget seems tight, and it will, you need to watch your spending even more closely but that doesn’t mean you can’t have fun and enjoy life! Easiest thing to do is say no to the upsell. Skip the boost in your juice, the cookie with your sandwich, or the extra shot of espresso in your coffee that the nice person behind the counter suggests. When they say it only costs a dollar it doesn’t sound like much (and they know that, right?) but those bucks add up fast.
The third habit is to lie low about your dough. Millionaires don’t really talk about their money. In their 1996 bestseller, The Millionaire Next Door, Professors Thomas Stanley and William Danko enlightened readers on the real habits of the wealthy. No need to get obsessive about money and definitely no need to get all flashy about it. I think another way of looking at it is that real millionaires have a healthy relationship with their money. It’s a tool that lets them do things they want to do. In other words, don’t tie your self-worth to your net worth.
Saving, spending wisely, and keeping a healthy perspective about money are three habits of successful millionaires. Start acting like a millionaire by adopting these habits right away. You set up automated savings, the next step is to think creatively about doing more with less. Fewer bells and whistles in your coffee, at lunch, or in your juice after a workout will add up to more money to invest and grow. This week, scale back and track. See what the impact is on your own wallet and let me know what you discover.
In the final article in our series, I will offer specific ways you can build your wealth.