Smart SpendingSmart Spending

Habits of the rich that the rest of us can adopt

Accumulating a million bucks is less about your income as it is the personal finance habits you keep. Read on to learn which of these habits can help you prosper.

By MSN Smart Spending editor Sep 25, 2013 6:41PM
This post comes from Alaina Tweddale at partner site

SA logoWant to be a millionaire? Saving up a million dollars is a goal well within reach for many Americans, according to Thomas J. Stanley and William D. Danko, wealth researchers and authors of "The Millionaire Next Door."

Businessman with cigar © Juice Images , SuperStock Surprisingly, those with a high income or sizable inheritance aren't necessarily more likely to build wealth than those with mediocre incomes and no wealthy ancestors. If that's true, then what exactly is the key to financial success?

The answer is, quite simply, behavior. First-generation self-made millionaires have created regular, consistent habits that build wealth.

Is it possible to learn these wealth and savings habits and then emulate them?

Thanks to Stanley and Danko's research on the wealthy, coupled with the insights of Charles Duhigg, the author of "The Power of Habit: Why We Do What We Do in Life and Business," it just may be.

Habits of the rich

Overwhelmingly, millionaires save a lot -- an average of 20% of their income -- and spend as little as they can. The trick, of course, is that spending less leaves more to be saved. Millionaires also tend to have these habits:
  • Creating (and sticking to) a budget. They know how much their family spends per year for food, clothing and housing, among other major expenses. They spend substantially more hours per month reviewing their budget than do non-millionaires.
  • Having financial goals. Wealthy people spend twice as many hours planning their future wealth strategy -- how much of their future income they will save and invest and for what purpose -- as do the non-wealthy.
  • Maintaining consistent lifestyles. They stay in the same home (no trading up) and remain married to their original spouse.
  • Minimizing major expenses. They often live in a modest home, drive a less-fashionable car and buy clothing off the rack at discount retailers like Kohl's and JC Penney.
Create a new habit
Now that we know how the self-made millionaires have done it, how can we emulate their behaviors?

Building a new habit is not always easy, as anyone who has tried to start a new exercise routine can attest. "If we can understand how habits work, however, they become much easier to control," says Duhigg in his book.

How can we create a new habit? According to Duhigg, every successful habit includes four integral parts:
  • A cue or trigger. A trigger can be a particular time when the habit will occur, a place, or even an emotion. What cue can you use to trigger a monthly review of your budget or larger financial plan? A cellphone alert? Payday? Maybe you can piggyback it on your already-planned bi-weekly visit to your favorite coffee shop.
  • A reward. Potential rewards include tangible items like a coffee shop biscotti or other small treat or a psychological boost like the feeling of accomplishment from seeing your saving account grow and your debt level shrink. The key to success is to pick a reward you'll look forward to.
  • The routine. This is where it all gets put together. The cue and reward are performed at a regular interval like once a month in the following cycle: Cue (phone alert) -- > Routine (budget review) -- > Reward (biscotti).
  • The craving. After several cycles, a craving for the reward may develop and the habit can become automatic. When your cue is triggered, you can associate your budget review with a reward. You might even start to look forward to the routine. If this doesn't happen, Duhigg suggests you didn't pick a compelling enough reward. Select a new one and try again.
Thanks to the insights of Stanley, Danko and Duhigg, you now know the steps to create and control keystone habits that can lead to financial success. All you need now is to put them into action.

More from
Sep 26, 2013 3:04PM
Don't have children before you have a years salary saved. Don't have children before you graduate college. Work for yourself first. I'm no miracle just have common sense. The poor will remain poor because they continue to bring children into the world. They continue to not advance their education and mostly they continue to buy into every FAD out there. 
Sep 26, 2013 4:58PM

"Why do the rich get richer and the poor get poorer?"


It's because the rich keep doing the things that make them rich, and the poor keep doing the things that keep them poor.

Sep 26, 2013 2:44PM
Much of this makes sense and the key is to live according to your means. By that, I don't mean if you make $50,000 a year live a $50,000 a year lifestyle, but instead live a $25,000 a year lifestyle. Most people do the opposite. They are the types that when given a raise or a promotion, adjust their lifestyle to that new amount. This is what started the old saying "the more you make the more you spend". 

Yes, you need to do a bit more to become wealthy because no amount of savings will make you a millionaire ... the lifetime total payout from a job just isn't there. However, you can become very comfortable and if played right, you might be able to invest that savings into something that will make you wealthy.

Sep 26, 2013 2:28PM
Hopefully, you are making a sarcastic comment Q Tip.  Otherwise I feel sorry for you.  I follow these habits as well.  I am in my mid thirties and already almost $70,000 saved and invested.  If all goes according to my financial plan then I will hit $1.8 million at 59 1/2 (the magic number).  You might want to follow these habits too and then you might not be so bitter. 
Sep 26, 2013 3:34PM
I follow these habits at 21 have since I was 18, I just thought I was "weird". But I really do enjoy keeping detailed tracking of my spending and seeing where I can cut costs and still maintain the lifestyle I want (and can actually afford) right now. But that's easy when what I want IS what I can afford, since my savings is priority #1.
Each of those is so important. Well, I can't comment on staying married.
But creating your budget and goals, then realizing them, is a very satisfying feeling. So is maintaining a consistent lifestyle, it's hard to guess where your money is going to go if you're constantly changing. Keep things relatively stable and work around it with your spare money.
May not make you wealthy, but it will keep you independent, debt free, and more or less "comfortable", I'd say it's more comfortable to go without some luxuries than go without necessities because you're spending above your income.
Of course all of this is easier for me because I only have to take care of myself. Responsibilities would make it more difficult, but it's never to late to slowly start transitioning to better habits!

Sep 26, 2013 3:35PM
The key word here is being able to save. No matter what your income level always try to save something.  If you can compartmentalize what you are saving for education, emergencies, investing, new car, house. If you have nothing set aside even just a small amount will help to reduce the stress and help you to decide your next move to gain a better income. Start a micro business or gain some knowlege somewhere to get a better paying job, every little bit helps.
Sep 26, 2013 3:42PM
Wait a minute!  You mean they work and save?   This goes against all the 99% have been saying!  How can a right wing article like this be get published?
Sep 26, 2013 3:27PM
Why would I do anything to better my financial situation? Seems to me being responsible is the worst thing you can do in this country. Take a small loan for a modest house? Don't worry your taxes will go to help those who didn't think through their actions! Be smart about healthcare and take care of yourself so you can rely on cheap disaster insurance? Why bother! Now you have to by insurance that  meets some bureaucrats level of "Acceptability" AND pay more in taxes to support the moochers even more! Don't take risks in large firms who worry about small short term gains than a stable company! Who cares their "too big to fail". What I've learned as an adult is responsibility is what is punished. 
Sep 27, 2013 12:41PM
Much of what she mentioned came natural to me.   I guess I didn't realize how difficult it was for many people to do these things.   Personally, it wasn't hard at all to save up $1 million even though my income was minimal most of my life.  It did take lots of patience however.  I basically just lived below my means, especially in my younger years.  In those years I put all my savings into mutual funds, they grew, I kept adding more, etc.  One day I reached the million mark  in my funds and celebrated by taking a vacation to Europe.   Hadn't ever been out of the USA before that.  If your going to live below your means your whole life, you have to splurge occasionally or it's not worth it.  But, my life was nothing special and I saved up that amount---actually it's closer to $4 million right now.   You can do it.  Read books like "The Millionaire Next Door" and put it into practice.  It's not hard, but it can take time.
Oct 5, 2013 12:22PM
Live below your means and save.  No one owes you anything.  A simple formula, not necessarily easy, but very simple.  Accept this and you will have a financially rewarding life.  Refuse to accept this, and you are a liberal, sitting in the cart, waiting for someone else to push. 
Sep 26, 2013 5:06PM
Read the book, "the millionaire next door" these are pretty much right out of it. Also buy boxed wine, huge savings over bottles... ;)
Oct 5, 2013 10:12AM

1) Do not get old.


2) Do not get laid off or outsourced.


3) Do not get downsized or replaced by cheap H1B visa Labor.


4) Do not get sick.


5) Do not allow anyone in your family to get sick or old.


See? It is so simple, you don't need social security or Medicare, affordable healthcare or any of that socialist Democrat stuff, vote Republican we will continue to destroy any program helps the middle class while giving tax cuts, bailouts and bonuses for failure to the wealthy.

Remember trickle down was proven to work by Raygun and Dubya.

Oct 5, 2013 11:57AM

Easy to keep a budget when your making $10,000 - $500,000 a month. 


Lets take a look at my situation as an example, making $20/hour which is considerable compared to other, although I have not had a wage increase for 6 years while my corporation continues to rake in billions.


20 x 80 hours = $1600 or $3200/month

Taxes = $1000/month leaving $2200

Bills (Hydro, natural gas, house phone, internet, water, etc.) = $600/month leaving $1600

Mortage and property tax = $900/month leaving $700

Food/household items = $600/month leaving $100


100 whole dollars a whole month to go splurge on whatever I feel like going crazy on.  Thats provided my car doesn't need an oil change or God forbid it breaks down and costs $2000 to fix.  Birthday party for a family member, monthly budget blown

Sep 26, 2013 4:03PM
Money invested carefully over a long period of time should give you a pretty decent nest egg because of the way compound interest works. Find something that pays a good return and then let it go do its thing. The trick is to find what to invest in, obviously. I probably have this wrong, but as I remember it, 7% compounded for 7 years should just about double in value. If you find something like an equity that pays a good dividend and the company allows automatic reinvestment you might wind up like a number of General Electric employees I met who had done this over their working lives with the company and now some of them were multi-millionaires - so far as I know, none of them were management, just rank and file...
Sep 26, 2013 7:43PM

Even though I have excellent credit I do not have debt.  I stay on a course of making sure that  if I want something I better want it bad enough to be able to pay it off next month if I charge it (for credit score purposes only, because you need to rotate credit to keep an excellent credit score).  This is my just in case emergency.  I probably could save even more; however, I do want to live and enjoy life.   Doesn't take much for me.  I just wish my family would do the same instead of spending and looking at me and saying oh woe is me.  I get sick and tired of being the bank for everyone, because I know how to save.  My mother taught me at a younger age and I listened, not the siblings; however, will say, my mother could rub 2 dimes together and make a dollar, she was a wiz and I have learned good lessons from her

Oct 5, 2013 3:31PM
You know how the rich get rich and stay that way? They find a way through any means possible to have others fund their wants and lifestyles. Case in point the VP of our company goes on three all expense paid trips every year to lavish resorts that are suppose to be for our clients but he conveniently includes himself and his wife. I have bought him three new iphones this year because he claims his old one had stopped working, and though he is supposed to return the old phone to the company when he receives the new one he takes them home and gives them to his wife and kids. He has done the same thing with ipads, mini-ipads and an assortment of all the latest gadgets and accessories he claims to needs. He also makes sure the company gives him tickets to every event we sponsor or promote, and takes what he wants from our prize closets that have already been designated for winners. Welcome to corporate America! And if you ask why don't I turn this slime ball in, one because I need my job and two because the last person that tried found themselves in the unemployment line and he remained unscathed. And this people is how the rich get rich and stay that way because they don't pay for anything!
Sep 26, 2013 5:24PM
Awesome advice by all means..I just think even if someone makes 30k to 40k/Year this is still gonna be a very hard goal to accomplish, due to issues unforseen I am going check to check at the moment, I am at a better job/better situation but I am taking a steady climb 30 with nothing going for me in 401k/savings etc its very tough out there at the moment..but anyone can start over at anytime, as long as nothing else comes up I should start saving up by 2014
Sep 26, 2013 8:50PM
People become wealthy by making smart choices far more than bad ones. You can make a choice to educate yourself so that you will likely always have a decent income. You can make a choice to live a healthy lifestyle and likely avoid costly health issues. Sometimes it's the simply choices we make early in life, that can determine the rest of your life. Some folks will never realize they were one unlucky break from being worse off than the folks they are complaining about.

You don't have to live below your means, you do however have to live within your means. Before you spurge on yourself, it's always important to put away as much as you can for those rainy days that will come. If you don't have a foundation from which to build from such as health, solid skill sets, and able to think critically, it really might not matter how much your income levels are since you are always one bad choice from throwing it all away.

Folks aren't poor simply because they have kids. Folks aren't poor simply because of educational differences. You don't have to be a stinking Genius to get rich. Sometimes you have to be lucky. Sometimes you just have to be well connected. There are plenty of folks dumb as crap but since they are a friend/relative of the right folks, they are making money hand over fist. Those are usually the ones crapping on everyone else.

The system was never designed for everyone to be wealthy. It was built however to give the illusion that everyone can be Rich.

Oct 5, 2013 7:31PM
I have a millionaire aunt and she is very frugal and lives below her means.  As she got more money, she didn't upgrade her lifestyle.

I've been copying her ways and what I'm able to do with my income is more than others are able to do with their income.
Sep 26, 2013 3:36PM
Apparently rich men smoke cigars too.
Maybe they buy them by the gross, on sale.

Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.