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Financial Foundations – September, 2020

Best practices from Millionaires on day to day personal finance

While everyone wishes they could spend and save like a millionaire, very few actually want to put in the hard work.

That said, for those who are serious about building wealth, much like building muscle or losing weight, it is merely a process or a few easy disciplines repeated every single day.

Here, we reached out to a handful of self-made millionaires, financial advisors and credit industry specialists to get their top tips on how to manage your money like the wealthy do.

From getting real about your hidden debt to simply cutting back on spending, here’s how to spend and save your money like a millionaire.

Diversify your investments (beyond the stock market)

Most high-net-worth individuals invest in asset classes beyond stocks and bonds, allocating portions of their portfolio to the private markets.

“Private equity, art, and many other alternatives can provide returns that are uncorrelated with the public stock markets, with the cost generally being that they are less liquid (so it is harder to sell out of your investment),” explains Robert Blecher, CEO and Founder of AltsForAll.com.

Get clear on your vision

“My one tip on how people earning average incomes can manage their money like a millionaire would be to be clear on their financial goal,” says Finance Expert, Jonathan Kellert.

“Having a goal to save $1,000,000 doesn’t really inspire anybody to make adjustments to their lifestyle. However, when they imagine what their life can look like once they have $1,000,0000 they can find the motivation to make the changes in order to accomplish the goal.”

Look into the property market

Millionaires make every cent work for them. By understanding the difference between assets and liabilities, you are one step closer towards behaving like a person who owns money, rather than feeling like money is constantly owning them.

“When you think about millionaires, you think about people who own a lot of property, right? So, look into it, you don’t need a great deal to be investing in real estate,” explains Andrew Taylor, Director at Net Lawman.

Spend less

“I made it a point to live on a fraction of my meager fellowship stipend,” explains  M. Reese Everson,Esq., author of The B.A.B.E.’S Guide to Building Wealth.

“I rented the most inexpensive apartment I could find and when I found an even cheaper place ($500 less), I moved from that apartment to the cheaper one to save even more money!”

Everson loved saving money, because she loved seeing the number in her savings account grow larger and larger.

“It felt good to see $10,000, then $20,000, then $30,000. I would look online to find the savings account that offered the most interest, and incentives. I’d open accounts just because they said if I did I’d get $250 for free. I loved knowing that I had options to use to build, when the time came.”

Create a cash flow plan
“Millionaires don’t have a budget, they have a plan,” explains Financial Advisor Jeremy Britton, who suggests tracking every single expense, no matter how small, for a minimum of 30 days, ideally 90 days.

“All successful millionaires do this for themselves and their businesses. A business or an individual who does not track their money will not be successful, it’s that simple.”

Treat your life like a business

“I was able to become a millionaire in my late 20’s because I look at my life like a business,” explains Neal Taparia, business owner and self-made millionaire.

“I modeled out how much income I was hoping to make in my twenties, combined with my expected expenses. Every month, I would evaluate if I was on track to meet the goals in my model, and make changes if I had to.”

According to Taparia, all of this gave him a roadmap on what he had to do to become a million by the time he was 30. 

Be honest about your debt

According to Credit Industry Specialist Mason Miranda, one of the best ways to manage your finances is to eliminate as much debt as possible.

Loans can rack up a lot of extra charges in interest, and carrying balances on credit cards can be even worse because of their generally high APR.

“To become wealthy, you may want to eliminate your debt completely, which would save you a lot of money in interest and fees,” Miranda explains, “If you choose to use short-term debt to your advantage, such as small loans and credit cards, make sure you’re responsibly paying them off and not missing payments.”

Treat your credit card like a debit card

Miranda also suggests treating your credit card like it’s a debit card. This means not buying something if you don’t have the funds to pay it off by the monthly due date.

“Pay off your entire credit card balance each month and avoid minimum payments,” suggests Miranda. “This will save you A LOT of money in interest.”