Money management requires some discipline. Personal finance is 80% behavior and 20% knowledge, so that behavior needs to include some discipline about spending, saving and tracking your money. This normally includes developing a touch of frugality. Don’t immediately think miserly ways, think ability to make sound economic decisions about money. Think luxury in frugal living, spending more on the things that are important to you and less on the things that aren’t.
What is frugal for you may not be for someone else, but as long as you have the money for what you’re purchasing then I say have at it. It’s not necessarily the items it’s your mindset. There is a central theme about being frugal that will translate to wealth.
Money saved through frugal spending is money that can be used for investments. Why spend a dollar and lose it forever, when you can invest it and use it to make money? Most millionaires are extremely frugal. Warren Buffet became the richest person in the world in 2008 with a net worth of a little over $62 billion. Now he is number three with a net worth of a little over $64 billion. Impressive right?!
Well another impressive fact that will hammer home this point is, Warren Buffet has had the same wallet for twenty years. He also still lives in the same house he bought for $31,500 in 1958. Most of the wealthy aren’t flashy big spenders. They’re quite frugal. He clearly spends on what’s important and not on the things that aren’t. Assets? He’ll take several. New wallet and flashy house, nope not an investment so if it’s not broke don’t fix it.
You’ll see varying degrees of frugal living. Minimalists are just that, they’ve paired their possessions down to just the essentials. Usually each object they own has 2-3 uses. Pick a level that is comfortable and makes sense for you. Listen to the money, your spending plan let’s you know what you can afford. Your list of financial goals will let you know what you shouldn’t spend. Remember it’s not the items per se, it’s the mindset about spending, saving and investing that will help you adopt the behaviors of savvy billionaires and build your own wealth.
Photo credit: Free Your Mind