Did you know that Warren Buffet still lives in a house he purchased in 1958 for $31,500?
While the list of wealthy people with frugal spending habits is long, there are obviously also wealthy people who own 75 cars but never get behind the wheel.
But what about all this wealth? Where’d it come from?
It’s been my experience that most wealthy people aren’t big earners so much as they are consistent savers.
Here’s an example: At a 5% annual rate of return, if you put away a mere $250 per month, at the end of 40 years, you’d have more than $380,000. Quadruple that monthly deposit, and you’d be considered pretty well off by many Americans.
What other things do wealthy people do to attain and maintain their wealth? Here are four that I find particularly interesting.
Wealthy people not only know where their money goes, they tend to live within their means. And that “means” budgeting, which, not coincidentally, is one of the key aspects of both planning for retirement and making your money last.
Here are 4 basic steps to help you start to budget:
Here’s an interesting fact: According to a survey of over 4,000 millionaires, roughly 50% have never paid more than $100 for a pair of shoes. What else did the survey reveal about the personal spending habits of wealthy people?
Clearly, unlike their depiction in popular culture, while the occasional splurge can be healthy, wealthy people typically aren’t consumers of things they don’t absolutely need.
You ever notice how the minute someone becomes famous, they almost immediately sign a book deal, start a clothing line, become a recording artist, and begin endorsing products and giving paid appearances? This is a form of revenue stream diversification, and it’s usually achieved when marketable people choose to work with a savvy management company.
Now, have you noticed how most lottery winners are bankrupt inside of five years? They win the Powerball and the first question they get asked is: “How are you going to spend your money?”
Cars, houses, vacations and jewelry. Most of these folks have no financial education and have likely never had a healthy relationship with money.
You may not be a movie star, but you obviously have more in common with a rising, hard working actor than you do a lottery winner. That’s because you’ve worked throughout your life and it’s likely you understand that money coming in from as many sources as possible is a very good thing.
Work with an advisor to create, manage and maximize as many of these revenue streams as you can:
82% of millionaires utilize the services of at least one financial advisor.And when you consider the number of millionaires who are in the banking and financial sectors, it’s pretty safe to say that, of the 18% who don’t, most of those probably have a lot of experience managing money.
There are no silver bullets to prosperity. Save, budget, plan, invest, repeat. And call your advisor if you have questions about creating (or updating) your personalized financial plan.
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1The NBRI Circle of Excellence Award is bestowed upon NBRI clients meeting one or both of the following criteria: Total Company score at or above the 75th percentile of the NBRI ClearPath Benchmarking Database and/or improvement of five (5) or more benchmarking percentiles in Total Company score over the previous survey.
2Scott Hanson (2011, 2012, 2013, 2014, 2015 & 2016) and Pat McClain (2012, 2013, 2014, 2015 & 2016). Barron's© magazine is a trademark of Dow Jones L.P. The ranking reflects the volume of assets overseen by the advisors and their teams, revenues generated for the firms and the quality of the advisors' practices.
3As of 01/20, Allworth Financial, an SEC registered investment adviser and AW Securities, a registered broker/dealer have approximately $8 billion in total assets under management and administration.
4Barron’s 2019 Top 50 RIA Firms. Barron's© magazine is a trademark of Dow Jones L.P. The ranking reflects the volume of assets overseen by the advisors and their teams, revenues generated for the firms and the quality of the advisors' practices.
✢Scott Hanson, Investment Advisor 2005, 25 most influential people in the financial services industry. The ranking reflects 25 people who Investment Advisor magazine believes have had or will have the greatest influence on the financial services industry.
✼Pat McClain, InvestmentNews 2014, Invest in Others Community Service Award, presented to an advisor who has made an outstanding impact on a community through managerial contributions to a non-profit organization.
†Financial Times, FT 300 Top Registered Investment Advisers, June 2019. The ranking reflects six areas of consideration including the company's years in existence, industry certifications of key employees, AUM, asset growth, SEC compliance record and online accessibility and calculates a numeric score for each company.
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