Saving money is important. We all know that. And it probably doesn't come as a surprise to you that the average (real millionaire not "apparent") millionaire is really good at it.
In this post, we're going to give you both strategic and tactical reasons why you want to become an expert saver through the lens of a classic work called, “The Millionaire Next Door”, by Thomas Stanley.
Before we jump right into the actual list, please allow me to very briefly walk you through the back story of how I got this list of "9 things" and how it relates to “The Millionaire Next Door”.
This particular list of nine has grown out of the years of both eliminating my personal debt and then engaging in the follow-up process of learning how to grow wealth. It's been further refined through coaching clients do the same. It's amazing to watch it in action.
If you follow this logic, you'll begin to see how the tactics (saving money) can naturally lead you to the strategy (building wealth/becoming a millionaire).
The cornerstone piece that helped change my perception how the wealthy actually deal with spending (and more importantly not spending) has been the book, “The Millionaire Next Door”, by Thomas Stanley. If you really want to understand the "why" and "how" the wealthy manage money, this is your window into their world.
In this highly insightful guide, Stanley outlines in great detail, what the lifestyles and spending patterns of "typical" millionaires in the United States look like.
The in-depth studies he conducted and the research he pulled together shows what the "average" millionaire actually looks like, and it's a very different picture than what I had before I read the book. I found the research to be pretty stunning and how these folks got to millionaire status and directly relates directly to our list of nine.
But more about that later. Let's first get to the list!
Here are the 9 things we do to save money and guard against those little workers (dollars) being siphoned out of our budget unnecessarily. The list is not exhaustive, so please feel free to leave all the ways you save in the comments below.
We shop at Dollar Tree for things like: Detergent, Toiletries, Dental Care, Cleaning Supplies (and even other things like socks and car maintenance supplies). Once you start making the comparisons, you'll be amazed at how expensive these items typically are at other retailers.
My wife and I recently switched from shopping at Kroger to shopping at Aldi and we now consistently save AT LEAST $50 on our grocery budget every month!
We LOVE Aldi! We've recently heard of another discount (German, like Aldi) grocery chain called Lindl. We may check them out as well.
We used to shop at Kroger for groceries and used Kroger's fuel points for gas discounts. It was working well for a while, then I changed jobs and now drive FAR less frequently or far.
The fuel points now make much less sense and our analysis showed that there was a greater savings by shopping at Aldi.
This is just an example of how your situation can change and how it's a great idea to constantly reanalyze your spending as you continue to "march toward frugality".
Many times (though, not always) the store brand is just a repackaged version of the national brand anyway. Why pay more for a name and some prettier packaging when you don't need to?
Track where every dollar goes, without fail. Keep a list of spending and track every dollar you spend. Our receipts get logged into the budget as soon as we walk in the door from the store.
This keeps us 100% on top of what's leaving the budget every month. If you've never been good at budgeting (and I mean really, who has?), check out our post on how to get started: How To Start Budgeting When you're Terrible At It.
Use the library to borrow books instead of buying them.
I used to be a bit of a book hoarder until I realized all the money I spent to "own" titles that I may read once (possibly) and then just sit on a bookshelf in my house for years and years.
Why not reconsider the purchase? If it's a reference that you'll use over and over, sure go ahead and buy it. If not, consider borrowing from the public library and saving some of that hard-earned cash.
We shop at Big Lots and Wal-Mart for discounted staples like: Toilet Paper, Paper Towels, Salt, Coconut Oil and we're always on the lookout for sales.
We always look to see if there’s a free or deeply discounted used version of what’s needed before we just go buy retail.
Admittedly, this one can be tough. We limit going out to eat to more of a “special occasions” kind of thing and using Groupons or other types of discounts when possible. It is important to enjoy life for sure so I'm not advising to never eat out or to be a hermit.
I'm just suggesting that you do this in moderation as eating in restaurants can become a major cost very quickly. I tell clients to try to limit this behavior and then track it closely when they "indulge".
Generally speaking, learning how to say "no" and offering substitutions or alternatives when presented with an opportunity to spend your hard-earned money.
When friends ask us to go out to eat or to go spend money attending an event (unless it's something we REALLY want to do and have budgeted for), our default position is to pause and try to think of and present some alternatives.
An alternative to eating out is well, eating-in or having a "pot luck" where the parties involved bring something to share. A substitution for going to spend money at a theme park (always WAY overpriced in my opinion) would be to go to a normal park and bring a volleyball, football and some food.
There are always alternatives and substitutions, you just have to want to get out of debt badly and save money enough to start considering them.
In terms of finding "best practices", some of the most effective ways I've uncovered them have been to study what other people do exceedingly well. These "things" include: debt elimination, wealth building, guitar playing, cooking, etc.
This quest for finding the best ways to save money actually lead me to look at what the average millionaire does.
By the way, I didn't actually get into the study of this way of thinking until after I had gotten completely out of debt.
So, I wanted to share it with you who may still be in the throes of debt to help you to perhaps shift your mindset a bit and help you get to zero debt just a little faster by looking past your current situation into a brighter future.
I mean after all, if millionaires have been able to accumulate that kind of wealth, it's worth taking a look at how they did it, right?
The studies show that the average American millionaire is likely to look like your local electrician or plumber. You know that one that lives in a working class neighborhood and lives an "understated" lifestyle.
They're more likely to look like that than they are the conspicuously consumptive lawyer, physician or corporate middle manager. You know, the ones that live in the "most desirable" upscale neighborhood and have all the visible "emblems" of wealth (i.e a BMW, a Rolex and a second home in the Hamptons).
To be clear, there is not any sort of judgmental analysis that one is better than the other. It's just a presentation of the fact patterns that are not well-known about the economic behavior of the average actual millionaire in our culture.
The overall analysis reveals that the former (the electrician, plumber) is quite typically much more adept at accumulating wealth due to the fact that they don't spend money on the artifacts of wealth (like expensive homes, cars, watches) like the latter (the accountant, attorney and corporate middle manager) typically do.
This tendency allows them to accumulate and grow wealth much more quickly than any other group in our society and it grants us a prized piece of insight into their psychology; namely how they play economic offense and defense.
In the book, Stanley goes further into the psychology of the real American millionaire. He does this by presenting a detailed outline of how they have largely mastered the financial practices of playing "economic offense" and “economic defense".
Economic offense is defined as everything you do to build the income side of your balance sheet.
That would typically be work, work, more work. It might also include owning some income producing assets like rental properties, dividend paying investments and/or a business.
Economic offense is critically important to your overall financial sustenance and long-term wealth building. And, it’s especially important when climbing out of debt.
On the other hand, economic defense, is where you’re guarding all the dollars you get to keep (i.e. after taxes). You can't allow them to sneak out of your house to buy unnecessary “stuff".
This economic defense is an acquired skill (kind of like how budgeting is). It takes time, planning and focus to develop. It is most effectively solidified by using the weapon of the monthly household budget.
By the way, if you're just getting started with budgeting and are looking for some structure, you can download our free budgeting forms here for help.
Using a monthly written budget gives every single dollar you earn a job to do. In other words, every single dollar that comes into the budget is accountable to do its job.
It doesn't matter how big or small that job is. Dollars count as well as do cents.
That’s not actually what I'm asking you to do at all (well, unless you're just ready to go nuts!). Patience with yourself and with the process makes staying in the game possible.
What I'm really trying to do is to encourage a new thought process. I want you to carefully consider how you allocate each and every one of those monetary units.
You've worked hard for those and I want you to protect them and grow them as much as possible.
0. Stop All Retirement Investing (Until Step 4)2. Starter Emergency Fund of $10003. Eliminate Debts Smallest To Largest (a.k.a The Debt Snowball)4. Full Emergency Fund of 3-6+ Months’ Expenses5. Invest A Minimum of 15% Income Into Retirement Accounts (and increase savings rate to 50%+ if possible)6. College Funding (if applicable)7. Pay Off The Home Mortgage8. Build Wealth, Serve, Be Ridiculously Generous And Go FI (Financial Independence)!