When it comes to building wealth, it’s not how much you make, but how much you keep. That’s a universal truth regardless of your income or net worth. In fact, many of the millionaires I’ve known live by that philosophy. Here are some of the ways they keep more of what they make.
1. Live below your means — Never peg the needle on your spending meter. Ask yourself why you are considering buying something bigger, newer or flashier. Happiness? Status? In the long run you may get more gratification from having that money in the bank. Be especially mindful of this when you get a raise or otherwise come into money. Work to keep your spending at pre-raise levels.
2. Shop smart – Financially successful people avoid paying full price for anything. They proudly shop at Wal-mart and Aldi for their daily needs, and will take the extra five minutes to buy cheap gas at Costco. This is true even when wealthy folk decide to splurge. In the market for a Mercedes E-class? You will enjoy a 2014 model as much as a 2016, don’t you think?
3. Cut the waste – Eliminate unnecessary expenses. If you aren’t using it, stop paying for it – from premium cable channels to club memberships to your home security system. A monthly budget can help identify opportunities to trim your spending by helping you see exactly where the money goes. You will almost certainly be astonished at what is revealed.
4. Avoid get-rich-quick investments – I’ve never met a millionaire who made his fortune on anything other than years of hard work. Take a pass when your brother-in-law promises to turn your $2,000 into $10,000 by the end of the month.
5. Avoid Temptation – Leave your credit cards and wad of cash on the dresser when you go shopping. Limiting your options avoids impulse buys and over-spending. This tactic is especially helpful if you are going to the mall or Costco. True story: Energy billionaire T. Boone Pickens makes a shopping list and carries only enough cash to buy what’s on that list.
6. Don’t get scammed — The more wealth you amass, the bigger target you become for scammers of every stripe, from Internet hustlers to home improvement con men. Take your time and ask questions until you are truly comfortable doing business with someone.
7. Liquidate your junk — Clean out the basement, garage and tool shed. Sell off what you don’t need or use. Yard sales are a blast. But if that’s not your cup of tea, donate your clutter to charity and take a nice little tax write-off.
8. Consider a second job – How does a second job help save money? By keeping you busy! Think how much money we spend simply because we have nothing better to do than amuse ourselves or engage in a bit of retail therapy. Your side gig doesn’t need to be a grind. Do something connected to your passions, like ushering at local sports events or clerking at a bookstore.