When many people think of why they are not rich, the first thought that comes to their mind is that they simply do not earn enough money. But whilst your earning power is an important factor in becoming rich, it is not the only way. Many millionaires alive today have instead chose a difference path – to spend less. According to the best seller, the Millionaire Next Door by Thomas J Stanley, many millionaires became millionaires because they lived frugally. When most people hear the word frugal, many assume this to mean cheap. But these millionaires are by no means cheap, they are economical about how they spend their money. And if you want to be a millionaire, you need this economical mindset too. Just read the story of Adam Khoo to see how millionaires think.
So if you aspire to be part of the rich, then you need to tighten up your wallet and cut out wasteful spending. You need to stop thinking average and start thinking millionaire. I have written many articles on how you can save money including, 5 tips to save money from the experts, 3 habits guaranteed you save money and how to save money shopping online.
In addition to those articles, here are 3 additional things you are spending too much on.
- Designer Brands – Paying too much attention to brand names can sure put a dent in your wallet. An experiment conducted by Supershoppers on Channel 4 showed that Primark Jeans are just as good as Levis jeans in terms of quality. SO what are you paying the extra £80 for – a badge that no one can see when you are wearing the jeans. Sounds like a bad deal to me.
- The Latest Tech – The easiest way to stay broke is by getting a new phone every time a new one comes out. There is a lot of temptation to get the latest gadget so it is no surprise to see many people upgrading merely a year after getting a new gadget. But constantly upgrading can leave you at square one with your finances.
Try this the next time your phone contract runs out. Instead of upgrading to a new phone, simply keep your phone and get a sim only contract. You will be amazed at the savings you make.
- Buying Lottery Tickets – I have done the maths and you stand an equal chance of winning the lottery with and without a ticket. Seriously, the odds are stacked against you. Advertising by lottery companies cause you to falsely believe it may be your lucky day to win the lottery. Statistically the odds of winning are much more difficult than you think.
In fact, the lottery is frequently referred to as a tax on the poor. Studies have shown that a large majority of Lotto players are uneducated, from low-income families. If you want to be rich, start acting like a rich person and stop playing the lottery!
Whilst cutting out wasteful spending is good, it is not enough for you to become a millionaire. In order to do that, you need to invest your money. Investing has the ability to make your money work for you over time. So the more you save, the more money you have to invest and the higher your net worth will eventually be.
Let’s look at an example of how saving money can make you rich.
|Annual Savings to Invest||10 Years of Investing||20 Years of Investing||45 Years of Investing|
|Coffee (Instead of brewing your own)||£720||£11,264||£35,584||£300,546|
If you stopped your wasteful spending now and invested that money in an index fund earning the historical average of 8% per year, you could amass a whole lot of money at 10, 20 and 45 years.
So the next time you plan on spending money on something you do not need, just think about how much money you could have in the future if you were to invest that money.