If You Want To Be Rich, Live Frugally
Do you want to be wealthy? Most people do, yet they aren't typically willing to make the sacrifices required to become wealthy. Did you know that most people that look and act rich really aren't? And most people that are rich don't look or act it? If you want to become wealthy then you have to live frugally. When people live frugally, they usually aren't trying to look or act rich.
Think about your spending and saving habits. Do you live beneath your means (spending less than you earn each paycheck) or do you spend every penny that comes through your bank account trying to appear wealthy? Rich people are more inclined to save money than spend money. When you spend all the money you earn, there is nothing leftover to save.
You might think that wealthy people always have the latest and greatest of everything, such as cars, electronics, homes, etc. but this tends to not be the case. One of the ways wealthy people amass their wealth is by purchasing good quality items (for example a very reliable car) and holding on to them for as long as they can. They are not perpetual upgraders; they use what they have as long as it is usable. This allows them to spend less and save more.
One of the principles of frugality for us is to look at the long term, bigger picture rather than just the immediate want. If you only want to drive a nice new car all the time, then you will constantly be purchasing a nice new car. The likelihood of you paying cash for these frequent car purchases is slim. By looking at the bigger picture and realizing that we want to save as much money as possible, means we buy a good quality used car with cash and hang on to it as long as we possibly can. This not only saves us thousands of dollars over a fancy new car, but also means that we do not have a monthly car payment. No monthly car payment = more money to save.
Using the car payment as an example, let's look at how that money can benefit you better if you save it. Let's assume a car payment of $500 a month, an average amount for a $25,000-$30,000 vehicle. Many people assume they will always have a car payment and see nothing wrong with paying $500 a month (or more) each month for their car. Over a person's lifetime that can mean more than $270,000 spent on car payments (assuming a car payment from age 25-70 or 45 years worth). That is a lot of money to spend on cars!
Imagine instead, that you saved that $500 a month in a mutual fund averaging 8% (a very conservative estimate!) for those 45 years. According to this savings calculator, if you saved $500 a month for 45 years, earning an interest rate of 8%, you will have an astonishing $850,672 at the end of 45 years. That could buy a lot of cars!
One of the reasons that wealthy people become wealthy is that they save as much money as they can by spending as little as they can. They live a very frugal lifestyle so that they can save as much as possible. This doesn't have to mean eating nothing but beans and rice and wearing clothes with holes in them. You can live frugally while still dressing nicely, doing and having nice things, and driving a nice car. The key is you don't have to spend a lot of money on it. Make sure that you live frugally, spend less money each month than you earn, and make wise purchases using cash only and you will eventually become rich - just like the true rich people.