Within the well-known book, “The Millionaire Next Door”, diligent research has lead the authors to the conclusion that most Millionaires have attained their wealth by frugality. 62.4% of the Millionaires answered yes to the title question, “Do you know how much you spend each year on food, clothing, and shelter?”, while only 35% of high-income NON-millionaires answered yes to this question.
Simply put, those that grow financially independent and become wealthy in life do it by planning their personal finances. They know exactly how much they spend on food, clothes, and shelter because they have budgeted for it. My wife and I started this process back in January and it’s not easy! There are unexpected expenses around every corner that can easily blow the budget. But, do you know what has helped us greatly? Cash. We withdraw $400 a month for our food in cash and stick it in an envelope. When we need groceries or want to go out to eat, we take our envelope. This does two things; it helps us not to make rash decisions to go grab a McDouble while we’re out (because we most likely don’t have our envelope), and it gives us a visual of how much we have already spent on food this month (and how much we have left of course). Currently, it’s the 12th of September, and we have about $100 left in the envelope, so we know that we had a little too much fun earlier in the month and probably went out to eat a little more than we should have. But, that’s ok. We’ll just have to scrimp a little more the next time we go grocery shopping. We do the exact same thing with clothing. If our clothes money runs out for the month, then I guess we’ll have to wait until next month to buy that item that we’ve been eyeing. With these budgets set in place, hopefully we are on our way to millionaire status as well.
What do you think of this article? Do you have other ideas that help you save money each month? Let me know! Also, make sure to ask the questions you have regarding personal finance, it might just become my next article.
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.