Time-Tested Financial Habits, part 1 of 5

Yes, as my uncle told me when I was a little kid, “A million is not what it used to be.” Nonetheless, from the source Motley Fool comes this —

1. Save a lot of money

Millionaires are frugal. Contrary to popular belief, most millionaires don’t own a yacht or drive around in a Rolls Royce. Instead, they save a large portion of their income. This starts with a budget—which lays out where your money is going and how much you can save.

Creating a budget or cash flow plan is essential to controlling your spending. The end goal is to assign each dollar of your income to an expense. It is much better to tell your money where to go than to ask where your money is going!

Many millionaires use the 50/30/20 budget rule. They allocate 50% of their income for essentials, 30% for wants, and 20% for savings.

But many of us know that saving is not easy. However, one easy way to save is to set up a monthly automatic transfer of cash to an investment account. That way the money is reallocated before you can spend it. You also won’t have to worry about remembering to save, and it can help you live on the remaining funds.

Millionaires also expect the unexpected and have an emergency fund. They often have several months of living expenses saved in the event of an emergency or job interruption. The alternative, that many non-millionaires might fall back on, is using high-interest credit cards to meet unforeseen expenses. We agree with this strategy and often suggest our clients do a cash carve-out strategy—which sets aside three to five years of their expenses in a separate investment account.

Millionaires understand that a dollar saved is a dollar you don’t have to work for. By steadily saving every month, they can be able to invest so their money works for them, not vice versa.