If you're going to join the ranks of the self-made rich, you should know how they get the best quality items for cheap or free. Saving up money and building a nest egg is a bigger priority for most rich people than acquiring “stuff” to show off their status. Even luxury items are a trap for middle-class families who want to be perceived as rich.
Learn how to live in comfort and style while filling up your bank account for a rainy day or retirement by following these tips.
1. Consider whether buying or renting is better.
The traditional wisdom is that buying a house is investing in an asset, but this isn't always true. The housing market crash showed that real estate value isn't constant and you can easily lose the money you invested from the mistakes of others in your neighborhood.
Self-made rich people know better. A house is a liability unless you have at least a quarter of the house's value saved up as a downpayment, a steady job, and a house that isn't extravagant or beyond your means. There's no shame in renting until you are in a position to put in a significant downpayment, and it allows you more lifestyle freedom and flexibility!
2. Don't buy a new car.
Doesn't everyone dream about the new car smell from an extravagant car? What about if you knew you're going to lose a third of the car's value from just driving it off the lot? No sensible self-made rich person will consider a new car to be an asset or investment.
A reliable used car will usually serve you better than a new car. You'll save money not just on car payments, but on all the related expenses: the initial downpayment, insurance, and even on interest from any debt you can pay down instead of paying for a new car.
3. Invest, don't spend.
Focus on putting your money into various types of investments instead of spending it. You should be investing at least as much as you set aside for spending money, especially in your early years or when building up a nest egg. The time for spending is after your investments give you disposable income, not whenever you have an unexpected windfall. Put at least half of all your unexpected income like tax refunds or gifts into investments and savings, rather than spending money.
To get started investing without cutting back, you can save on insurance, cable, and cellphone bills by visiting a broker or negotiating with your existing company. Then, invest the monthly savings you just created.
4. Learn how to be happy with what you have.
Self-made rich people tend to value experiences more than possessions. Learning what you need and like, not just what you want because other people have it, is key. If you can do this, you will have money in case of emergencies, for an early or comfortable retirement, and when big purchases come around.
Stop spending money rashly and look for good deals on curbs, at garage sales, or in thrift stores to find for things you actually need. These bargains will mean more to you because of the effort it takes to find them, and the self-knowledge of what you actually like, want, and need that comes with that effort.
To become a self-made rich person or family, you'll have to learn how to avoid spending money and instead learn how to invest it wisely. Don't buy assets that will quickly depreciate, and focus on investing at least as much as you spend on frivolous purchases. With some self-discipline, you can live well while building your personal wealth.