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5 frugal habits of the rich

Some very wealthy people have retained the spend-less-than-you-earn mindset that got them where they are today.

By MSN Money Partner Feb 27, 2013 7:10PM

This post comes from Kyle James at partner site U.S. News & World Report.

 

U.S. News & World Report logoA fat salary isn't the only way someone can strike it rich. Regardless of their income level, people who live below their means, invest wisely and live modestly are on the path to real wealth.

 

Here are five frugal habits many of the upper class have adopted to build long-lasting wealth and financial independence:

Drive a modest car. Your car should serve the purpose of getting you safely and comfortably from point A to point B only, and nothing more. When you pull up to a stoplight in an expensive car, you might impress a stranger. However, don't let the price tag of your car define your character or image, because at the end of the day most people couldn't care less what type of car you drive.

 

Let Facebook founder Mark Zuckerberg, who drives a modest $30,000 Acura TSX entry-level sedan, be your role model on this one.

 

Actress Hilary Swank attends the 2013 Vanity Fair Oscar party
 
© Jon Kopaloff/FilmMagic/Getty Images
Buy a modest house. Warren Buffett famously still lives in the Omaha, Neb., home he bought back in 1958 for $31,500. Take Buffett's cue and don't overwhelm yourself with a large monthly mortgage payment. Buy a modest and comfortable home and use the money you save to build your savings and retirement fund.

 

Don't carry wads of cash if possible. Try to avoid traveling with a wallet packed with cash. According to Bankrate.com, 86% of people who spend cash on luxuries like expensive cars, jewelry and electronics are non-millionaires trying to act the part by purchasing luxury brands.

 

Instead, follow the example of oil mogul T. Boone Pickens, who famously shops with a grocery list and carries only the amount of cash he needs to make purchases.

 

Don't pay full price. A great way to keep more of your money is by not paying full price on anything. Hilary Swank, above, who has an estimated net worth of $40 million, is commonly seen using coupons at the grocery store. Michelle Obama often opts to shop at Target or H&M rather than high-end department stores.

 

A great way to build wealth is to have a frugal mindset and use the money you save on consumer goods to build your investments and savings accounts.

 

Have an action mentality. Almost all self-made millionaires have one thing in common: They are people of action. They don't sit around feeling sorry for themselves and waiting for something good to happen to them, as opposed to the people who I would say have the "lottery mentality."

 

People of action take appropriate risks, are constantly looking to improve themselves, and are addicted to knowledge, as it is the best way to gain a competitive advantage in life's financial endeavors.

 

Truly rich people are those who take their income and turn it into wealth by investing wisely, saving, and living frugally. People who take their income and try to use it to support an unsustainable lifestyle are those who end up in debt and are unable to retire on their terms.

 

When it comes to money and finances, it all boils down to choices and personal responsibility. Which road are you going to take?

 

More from U.S. News & World Report and MSN Money:

72Comments
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When I was in my 20s, I worked at a used furniture store. About once a week the owner would say something like, "That guy that just left - he's worth millions". One day I asked him why all these 'millionaires' shop in a used furniture store. He said, "That's how they got to be millionaires."

 

I've never forgotten that.

Feb 27, 2013 10:57PM
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I do all these things.  Done them all my life.   I also have several million in the bank and no debt.  I especially like the house and car examples.  
Feb 28, 2013 12:39AM
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Usually a person who is frugal with their money has a spouse who likes to blow money like theres no tomorrow.  These people who waste money usually are the ones who have never seen hard times. It always amazes me how stupid some people are when it comes to money.
Feb 28, 2013 10:00AM
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What is this with the Buffet smacking? He worked his way to multi-billionaire status, gives away billions, still works everyday, provides common sense to investments, grows companies that hire people and he has ethics. Is he perfect? Maybe not however who amoung us is?
Feb 28, 2013 11:36AM
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My net worth is above $1 million but I don't consider myself wealthy. My salary has never been above $55K so I got there by being frugal and saving as much as I could. I don't have a mortgage or car payment but I routinely put away the equivalent of a mortgage and car payment every month, and if it so happens that in any month we are low on extra cash to spend we tighten the belt a bit rather than not make those "payments". We just won't go out to eat or to the movies and skip any extra purchases that month.

 

Most of the advice in the article is common sense. Always shop around for best price when making purchases, we tend to buy more when stuff is on sale, use coupons, etc. Eating out you can get discounts from sites like restaurant.com which saves some money (and also introduces us to new restaurants). Our new house is about 3,000 square feet which we purchased for cash after many years of saving and living in a more modest 1,400 sq. ft. home. I would have had no problem living in the old home forever but we got what we believe is a great deal on a foreclosure for a house that we always dreamed of owning but never thought we could afford. Our two cars were new, one was a showroom model that came with 1,500 miles but also a $6K discount and full warranty, and the other I bought by taking advantage of the clash for clunkers program a few years back by trading in a '96 van. Both new cars' MSRP were under $20K so not fancy, just reliable fuel efficient vehicles that we intend to drive them as long as we can.

 

The biggest thing is live within your means and have a plan of where you want to be financially in 5, 10, 20 years and then work towards getting there. Save and invest. It can be done but requires sacrifice and the will to do it.

Feb 28, 2013 11:46AM
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Amazing how many millionaires are suddenly commenting on this article.
Feb 28, 2013 9:54AM
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it doesent matter how much money you have it's what you do with it  that counts



Feb 28, 2013 10:54AM
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I to live below my means.I don't ever remember spending all of my paycheck.Years ago sometimes I would go 3,4 or 5 weeks before I deposited the checks in the bank.People can live below their means.But many don't.They want stuff.The smart phone,3 or 4 hdtv's and the service ,cable satellite etc.

They buy to much home.Or make the mistake of buying when really they should only rent.I could go on and on.

Feb 28, 2013 12:44PM
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Nice to see an article like this compared to the usually silly fodder.  It is true, you won't see rich people buying lottery tickets or living above their means like the poor.  That is why the phrase "The rich do what the poor are unwilling to do to become rich" is so true.  Also, most rich people don't have litters of kids or spend their college savings on rims. 
Feb 28, 2013 11:43AM
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to All-That:   They are very common sense approaches to life and people would be well served doing them.   I have been told before that I am very good with money and that I am this and I am that and where did I gain such knowledge.  The very first thing I will tell them is this.  "I am not a fiscal guru by any means.  If I am smart, I am smart enough to know to do five things and if I stick by them and some sort of catastrophe does not take me down, I should be o.k.   These five strategies are:  (1), Purchase a home within  your means.  Never purchase a home that you feel you can "financially" grown into.    Never look at your home as an income source and/or a base for future retirement.  If you get it paid off, as you should, that is only gravy.  (2)  Contribute all the money you can to a pre-taxed retirement plan.   If your fortunate enough to work for a company that contributes, do whatever  you can do put all you can in there.  It is free money.   (3)  Debt, stay away from it at all means. Credit cards in the wrong hands are the devil's spawn.  In the proper hands, they are very beneficial.   (4)   If you can purchase Roths, do it.   Lastly (5), Never, ever keep up with the Jones.  Never.
Feb 28, 2013 11:54AM
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Common sense, yes but apparently most people who cannot afford to pay cash for things are the ones buying expensive items on credit.  Why would anyone want to upgrade just because it is the newest thing out there?  People need to stop all this spending just to brag about what they have purchased and then complain when anything goes wrong like losing their job and that they canot live on their unemployment check.
Feb 28, 2013 11:03AM
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"Frugality is a significant increase  in income ".Cicero

Feb 28, 2013 11:54AM
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All solid advice.  I bought more house than I need, but with current interest rates and prices my mortgage is still reasonable, and now my fiance and I won't outgrow our home when we have a family.  Love the car advice too, I've been driving my paid-off Civic about 4 years and plan on keeping it at least another decade, more if it holds up as well as I hope.
Feb 28, 2013 10:17AM
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While all of this is just common sense money stuff, when it comes to being "rich," I think a friend of mine (who is monetarily quite comfortable) put it best:  if you have more true friends than enemies, then you're rich.
Feb 28, 2013 2:04PM
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Michelle Obama...Really?!  You HAD to put Michelle Obama in this story...Really!?

Only wish she were so "frugal" with the people's money as she supposedly is with her own!

Feb 28, 2013 12:21PM
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This thing about Warren Buffett living in a modest house is BS.  He has a home in Laguna Beach, I believe in Emerald Bay, in one of the priciest spots in the country...and who knows how many other homes he owns in exclusive areas.  A few years ago he had the nerve to claim that the people in California didn't pay enough in property taxes.  Californians pay WAY TOO MUCH in all kinds of taxes.  So, he can just shut up and go back "home" to Omaha!    
Feb 28, 2013 1:16PM
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I guess it's romantic for this writer to believe that the rich got rich by living a frugal existence but it just is not so.  Warren Buffett also owns a private jet.  So do most billionaires.  The rich are rich because they have made a lot of money.

Consider this: with a billion dollars, you can easily spend two million monthly from now until the end of time and never touch the billion dollars.  Whether you spend $500 monthly on groceries or $1,000 will not amount to a hill of beans.
Feb 28, 2013 11:50AM
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If Buffett bought a modest home in 1958 for $31,000, he overpaid. My parents bought a modest home in 1961 for $12,000, in Chicago.  What kind of house does he have in Nebraska that was worth $31,000?
Feb 28, 2013 1:29PM
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Nope, you are wrong

the government is craking down on those folks. No more improving your status. Down with the little man. You work and feed us and I will drink hot tea and watch

Feb 28, 2013 1:39PM
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How about these 5 "frugal habits"...

 

1.  KEEP PEOPLE EMPLOYED

2.  Donate money to charities.

3.  Contribute back to the local economy

4.  Sponsor local sporting events and teams

5.  Pay MORE taxes to the township they reside in.

 

Yet, you don't hear this lefty network saying what the "rich" give back.

 

This is all but smear from the left trying to stoke up ire in the voters against the Republican party, because their lord and savior Noblaba has nothing else left.  The check's come due, and Noblaba dosen't have the b***s to tell the american voters that re-elected him for 4 more years that now THEY are the ones that will have to clean up HIS cluster**cks, with higher taxes.  Try as you might guys, all that's left now is the TRUTH about how YOUR party has single handedly put america into debt, and WE the taxpayers (including the rich) are left with the bill.

 

Thanks Noblaba.  The "hope and change" feels good now. 

 

You'll have to excuse me now, I need to go get my 1040's done, as well (if I have enough money left) buy some vaseline...

 

Just saying...

 

Sincerely,

 

A dis-satisfied customer and voter...

 

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