Three frugal tips from the world’s wealthiest

The world’s wealthiest are often associated with decadent lifestyles. But while it is true that the wealthy love to spend, most self-made millionaires and billionaires have a frugal approach to spending. After all, this is one habit that helped them acquire and retain their wealth.

Warren Buffet, the world’s eighth wealthiest man is known for paying for McDonald’s food with coupons, singer Dolly Parton freezes leftover meals, and Mark Cuban, the owner of Dallas Mavericks, has lived in the same house for 18 years.

If you want to join the ranks of self-made wealthy people, be ready to tighten your purse strings even if you can afford to splurge. Most self-made one-percenters made their way to the top through managing their money effectively, efficiently and prudently. They don’t ditch the habit of stretching a dollar and seeking bargains just because they have made it.

As someone who wants to build wealth, it behoves you to learn all you can from the world’s self-made billionaires. Here are some of their secrets:

Live in a simple home

With the sudden influx of money, it is understandable that you’ll feel the urge to spend more. You might want to acquire all the symbols associated with your new status – from flashy cars, big houses and expensive vacations. It would be prudent to maintain a simple lifestyle that prioritises experiences over acquiring material things. Don’t fall into the trap of buying a new house if the one you currently have is adequate.

Warren Buffet has lived in his current house since the late 1950s. He purchased the modest house for about USD30,000 and never felt the need to move, although he could easily afford it. The house is worth USD652,619 (Sh70.5 million) today.

As earlier mentioned, Shark Tank’s Mark Cuban has always been keen on not spending too much on his residence. When he was starting out as an entrepreneur, he lived with roommates to share costs. “I did things like having five roommates and living off of macaroni and cheese, and I was very, very frugal,” he said in an interview. Even after he became legitimately rich, Cuban has never felt the need to keep changing houses. “I have lived in the same house for 18 years and still have the same cars,” he said.

Zappos CEO, Tony Hsieh, is another wealthy individual who chooses to live in a simple residence. Despite his USD780 million (Sh84 billion) net worth, he has opted to live in a 240-square-foot Airstream trailer that costs less than USD1,000 (Sh108,000) per month. He explained that he loves the experiences in the trailer park.

“I just love it because there’s so many random, amazing things that happen around the campfire at night. I think of it as the world’s largest living room,” he said.

By living in the same home for decades, these billionaires have more money to spend on the things they care about. For instance, Mark Cuban splurged on a private jet in the 90s. “That was my all-time goal because the asset I value the most is time, and that bought me time,” he said.

Buy a reasonable vehicle

Flashy cars are one of the most common status symbols, especially among the newly rich. But cars are probably the worst investments to spend your hard-earned money on.

A car is a depreciating asset – as soon as you drive it off the dealership, it starts losing value. Along with the money spent on a purchase, you have to spend more to insure the car, register with the authorities, repair and maintain it.

However, in today’s world, a car is almost an essential need. You will need a reliable form of transportation to travel to and from your job or business to produce an income. A car also comes in handy for driving to and from your social engagements. In short, buy a car that is functional rather than flashy.

Finance gurus recommend buying a used car. Buying a car that is more than a year old ensures that you won’t lose money with the 10 per cent depreciation associated with new car ownership. Additionally, it’s advisable to only buy a car when you can pay cash for it. Buying a car using a loan means you will end up paying more for it than the cash price, which doesn’t make sense for such a rapidly depreciating asset.

This reasoning is why many wealthy people choose not to overspend on cars. Billionaire Mark Zuckerberg drives a Volkswagen GTI, which costs around USD28,595 (Sh3 million) when new. Despite his wealth, Amazon CEO Jeff Bezos drove a 1996 Honda Accord as of 1999, two years after Amazon went public. Alphabet CEO and co-founder of Google Larry Page was reported to drive a humble Toyota Prius as of 2018.

The lesson is to view your car as a means of transportation, rather than a status symbol. Look for something that fits your needs and will serve you for as many years as possible. You should go easy on the upfront cost and properly maintain your car. That way, you will get the most out of your car.

Buy household goods in bulk

Do you shop from your local supermarket weekly or daily? This is another way that you’re losing money. When you buy in bulk, you spend less on each unit. This means you will have more money for your savings account or to put away for retirement.

These savings might not seem significant but when you factor in the transportation cost and time you spend on frequent shopping trips the dollars add up pretty quickly.

As long as you don’t buy so much stuff that it will go bad before you use it, it is always a good idea to buy common household goods in bulk. We’re talking about goods such as detergents, soap, toothpaste, toilet paper, sanitary towels, and foodstuffs. For even more savings, buy these goods in bulk when they’re on sale.

Billionaire Mark Cuban advises that you should buy two years’ worth of toothpaste or other household items when you see them on sale. It’s so hard to make a return on regular investments that … you’re better off buying two years’ worth of toothpaste when it’s on a 50 per cent discount. There’s an immediate return on your money,” Cuban said in an interview with Vanity Fair.