Your neighbor may be a millionaire – without you even knowing it. Many millionaires, and even billionaires, live a far more frugal life than most people imagine. By paying more attention and less money, they are often able to keep, invest, and appreciate more of their money (than other people – who may even “earn” or start out with more than they do).
Some very wealthy people have adopted a very “minimalist” lifestyle – and “own” hardly anything (enabling them to live and travel with ease without having to maintain or manage a lot of material possessions). The main difference between them and the “destitute” who also own little-to-nothing is that they possess the financial resources to purchase and provide for their needs if, when, and how they choose.
According to Forbes, Carlos Slim Helu is a (Mexican) telecom tycoon with a net worth of $60.6 billion. He is well-known for his frugal tendencies. Assuming no changes in his net worth, he could spend $1,150 a minute for the next 100 years before he ran out of money. To put this in perspective, he could spend in 13 minutes what a minimum-wage earner brings home after an entire year of working every day.
While the world’s 1,011 billionaires have, quite literally, more money than they can possibly spend, some are still living well below their means, and save money in surprising places. Even the 6,864,605,142 non-billionaires among us can partake in the following spending tips from frugal billionaires:
1. Make your house a home – not an investment (or symbol of your wealth)
Billionaires can afford to live in the most exclusive mansions imaginable – and many do, including Bill Gates’ sprawling 66,000 square foot, $147.5 million dollar mansion in Medina, Washington – yet frugal billionaires like Warren Buffett choose to keep it simple. Buffett still lives in the five-bedroom house in Omaha that he purchased in 1957 for $31,500. Likewise, Carlos Slim has lived in the same house for more than 40 years.
2. Reduce your need for parking
Thrifty billionaires including John Caudwell, David Cheriton, and Chuck Feeney prefer to walk, bike, or use public transportation when getting around town. Certainly these wealthy individuals could afford to take a helicopter to their lunch meetings, or ride in chauffeur-driven Bentleys, but they choose to get a little exercise and take advantage of public transportation instead. Good for the bank account, great for the environment – and in many ways even better for the body and mind.
3. Buy clothes for yourself – not others
While some people, regardless of their net value, place a huge emphasis on wearing designer clothes and shoes, some frugal billionaires decide it’s simply not worth the effort, or expense. They do not feel the need to impress with how they dress. You can find David Cheriton, the Stanford professor who matched Google founders Sergey Brin and Larry Page to the venture capitalists at Kleiner, Perkins, Caufield & Byers (resulting in a large reward of Google stock), wearing jeans and a t-shirt.
Ingvar Kamprad, the founder of the furniture company Ikea, avoids wearing suits, and John Caudwell, mobile phone mogul, buys his clothes off the rack instead of spending his wealth on designer clothes.
4. Consider the cost – and cut what you can (including your own hair)
Many people are willing to pay $45 for a haircut, and some can and do spend up to $800 per cut and style. Multiply that by 8.6 (to account for a cut every six weeks) and it adds up to $7,200 per year, not including tips. Billionaires can certainly afford the most stylish haircuts, buy many cannot be bothered by the time it takes or the high price tag for the posh salons. Billionaires like John Caudwell and David Cheriton opt for cutting their own hair at home. A haircut in a barber shop charging $7-$14 (or less) is usually in every way as good (and sometimes better) as a more expensive cut.
5. Keep your car just a car
While billionaires like Larry Ellison (co-founder and CEO of Oracle Corporation) enjoy spending millions on cars, boats and planes, others remain low key with their vehicles of choice. Jim Walton (of the Wal-Mart clan) drives a 15-year-old pickup truck. Azim Premji, an Indian business tycoon, reportedly drives a Toyota Corolla. And Ingvar Kamprad of Ikea drives a 10-year-old Volvo. The idea is to buy a dependable car, and drive it into the ground. Buying a used car is almost always a better value (and can also often allow you to drive a better car) than buying a used one.
6. Buy only what you actually need and will use
It may surprise you, but the world’s wealthiest person, Carlos Slim (the one who could spend more than a thousand dollars a minute and not run out of money for one hundred years) does not own a yacht, a plane, or many other things people often associate with billionaires. Reducing the amount you spend is the easiest way to make your money grow. Many of those that can most “afford” to not even look at price tags seldom pay “retail” – or even pay at all.
Many billionaires have chosen to skip these luxury items. Warren Buffett avoids these lavish material items, stating, “Most toys are just a pain in the neck.” Mr. Buffett does, however, own trains – but not for personal transportation.
What We Can Learn
Some of the world’s billionaires have frugal tendencies. Perhaps this thrifty nature even helped them make some of their money. Regardless, they have chosen to avoid some unnecessary spending (at least on their scale) and the 6,864,605,142 non-billionaires out there can follow suit, eliminating excessive, keep-up-with-the-Jones style spending. No matter what a person’s income bracket is, most can usually find a way to cut back on frivolous spending, just like a few frugal billionaires.
Here 5 Tips to Build Wealth and Success:
1. Live Below Your Means.
Being wealthy isn’t just a product of your salary or investment prowess; it’s learning how to save.
Saving is the key to preserving your wealth. Just because you think you can afford something doesn’t mean you should buy it. Keeping an eye on your bottom line will pay dividends over the long term.
2. Bounce Back From Defeat.
Most successful and wealthy people have overcome obstacles and failure along the way.
3. Promote Yourself!
Regardless of the profession, the rich and successful tend to have a strong sense of self-worth — key to skillfully navigating an upward career path.
4. Develop Street Smarts.
Don’t let others take advantage of you.
5. Buy Cheap.
The rich can afford to splurge, but that doesn’t mean they do.
Shopping for bargains keeps people wealthy. Paying top dollar when you don’t have to doesn’t make sense.
© 2010 – 2012, Oren Pardes. All rights reserved.