Saving your way to becoming the “millionaire next door”
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Let’s say your parents are both in their late 70's, they never made over $100,000 a year at work, and they also raised and put a couple of kids through college. And yet, by working hard, spending responsibly, and making smart investment decisions, they’re somehow millionaires. They aren't Mark Cuban rich, or even multi-million-dollar millionaires, but they’ve accumulated enough wealth to have a comfortable retirement and thensome.
How did they get to this level of success? What decisions did they make along the way that put them on the path to living out the rest of their lives without much financial stress? It may actually be more attainable than you think, especially if you plan ahead and start saving early.
How to save like a millionaire
There are a variety of ways that people reach this goal, and it often takes a degree of frugal living and a keen ability to properly manage and invest your savings. Here are a few key money-saving principles to learn that many retirees in the same boat can attest to.
Use rather than consume
What’s inside many of our parents’ homes is usually a testament to seeing how long things can actually last. Whether it’s 25-year-old towels, dishes, and silverware, cars with 90,000+ miles on them, or worn but perfectly good furniture—they take care of their things so they last, which helps them avoid having to continuously put money towards replacing them.
In many ways, saving smartly can sometimes look similar to practicing minimalism. By buying only what you need and being very critical about the definition of “need”, it’s possible to stop craving the short-term thrill of spending and put that money into savings and investments instead.
Look around the room you’re in now—what do you see that you haven’t used all week, all month, or even all year? Buying these things probably made you happy at first, but they may have quickly fallen into disuse. Practice owning less while valuing and utilizing what you already have.
Spend time with friends, not services
Seeking out fulfilling moments that don’t have a price tag can go a long way towards saving for the long term. As many of our parents can vouch for, having a close network of family, friends, neighbors, and community members can enrich your life far more than any pricey annual trip.
Hang out with friends at home, volunteer, spend time in nature, or take advantage of free museums and local events. You may discover that those memories are just as valuable as the ones that cost a pretty penny. Similar to valuing what you already have, make a point of focusing on the relationships around you rather than costly experiences or services that may prevent you from reaching your savings goals.
Make big purchases slowly
We may roll our eyes, but many of our parents swear by making their cars last as long as possible, even if they don’t make for the most glamorous ride. When they are ready to make a much-deserved replacement, they do their due diligence in terms of planning ahead before taking the plunge.
Proper research online, multiple trips to different dealerships, and a good bargaining mentality go a long way toward getting the best possible deal and potentially saving a bundle. By not being in a hurry when it comes to large purchases in life, and never paying more than you believe to be the best price, you’ll most likely make more sound financial decisions when it comes time to pony up for necessities.
Don't be afraid to spend money, but be conscious of what you get
No one is suggesting that our parents or others who live a comfortable retirement have lived an extremely frugal life of being shut-ins or homebodies. Many have traveled all over the world, pursued countless hobbies, owned motorcycles and jet skis, or built amazing collections of antiques.
They do the things they want and live a full and rich life, but they also pace things out and never over-accumulate. They get maximum enjoyment from the purchases they make and the experiences they have.
In the end, this is the important one. You don’t have to be a sophisticated investor that buys and sells stocks to create a nest egg. Many of our parents have simply put away as much as they could, whenever they could. They maintained a good handle on their money and made it a priority to save first.
In fact, many of them may have not experienced big savings until their kids moved out and their expenses dropped. However, many will also say that it was the money they saved before that time that grew the most, especially when factoring in compound interest. There’s no time like the present to start reaching your savings goals faster. A high yield Varo Savings Account offers no fees and easy auto-saving tools to help grow your money.
For many of us, it can be hard to grasp how our parents anticipated so many of the actions that are consistent with good money habits. Granted, the world is a different place now and will be for the next generation. But that doesn't mean we can’t take cues from what some of our parents or other retirees have done to become millionaires and try to reflect their wisdom in our own lives.
While becoming a millionaire by the time you retire might seem unattainable, or at the very least too far away to even think about, incorporating responsible spending and saving habits into our daily lives in the immediate future can go a long way toward helping us all eventually get there.
Unless otherwise noted above, opinions, advice, services, or other information or content expressed or contributed by customers or non-Varo contributors do not necessarily state or reflect those of Varo Bank, N.A. Member FDIC (“Bank”). Bank is not responsible for the accuracy of any content provided by author(s) or contributor(s) other than Varo.
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