What the wealthy can teach us

Inc. Magazine

Dolly Parton freezes leftovers. Sarah Jessica Parker dresses her kids in hand-me-downs. And Warren Buffett, the financial whiz and billionaire, still lives in the five-bedroom home in Omaha he bought in 1958 for a mere $31,500. And he never spends more than $3.17 on breakfast.

Are these just the quirky habits of the rich and famous? Not at all. They are part of the reason these millionaires and billionaires acquired and have retained their wealth: by managing money effectively, efficiently and prudently.

When I ran my first company, I routinely paid myself last. It didn’t hurt to cut luxuries like eating out; I knew I was setting myself up for a better future.

What I didn’t realize is my penchant for penny-pinching wasn’t unusual. In fact, many rich people who once knew tough times have never lost their ability to stretch a dollar or seek out bargains.

Though it may sound silly to think of J.K. Rowling worrying about money, she has said that she had trouble getting comfortable with the sudden influx of cash after her Harry Potter books became bestsellers.

Yes, you should enjoy the money you earn and not be a miser, because it’s important to treat yourself and others now and then, but we can all learn some secrets to sitting on cash instead of being profligate.

Here’s how to make smarter choices when it comes to money.

1. Live below your means

After purchasing his home in Omaha, Buffett settled down and never moved again, according to Business Insider. When he needs an escape, he goes to an oceanside family vacation home in Laguna Beach, Calif.

Mexican business magnate Carlos Slim follows the same principle of living frugally. He hasn’t switched residences for four decades. Again, his choice not to bounce around or buy several homes has helped him become a billionaire.

Even if you never make the Forbes list of billionaires, it’s smart to lower your living costs.

That can apply to things big and small. Follow the 24-hour spending rule. If you are tempted to buy something, wait 24 hours. The delay allows you to shop around for a better deal and may even help you decide you really don’t need the item.

2. Buy in bulk

I’m a Costco habitue and an Amazon fan because I appreciate being able to purchase frequently used items in larger quantities. As long as they won’t sit on a shelf for eons or go bad, the decision to buy in bulk makes perfect sense.

Mark Cuban apparently agrees. In a Vanity Fair video, he advised buying two years’ worth of toothpaste or other household item whenever you see it on sale. Although you pay more up front, you save on the back end.

3. Invest in a reasonable vehicle

Don’t expect to see Mark Zuckerberg zipping around in a Ferrari. According to Business Insider, the frugal Facebook founder prefers to get from point to point in his Volkswagen GTI.

Evaluate the pragmatism of your own transportation. According to Carfax, vehicles can depreciate up to 25 percent annually.

Go easy on the up-front cost and try to keep your wheels on the road for as long as you can. Find a reliable make and model and stay current on the maintenance.

4. Fly economy class

Business and first class may tempt you beyond belief, but unless you can save up travel points and get a good deal, always fly economy. Even Ingvar Kamprad, the late Ikea founder, flew frugally.

His belief was that just because he could do something didn’t mean he should, and that included wasting dollars on luxury plane travel. First class comes with perks, no doubt, but you get to your destination just as quickly if you choose the cheap seats.

5. Use coupons

You probably don't have time to be an extreme couponer, but don’t let that stop you from clipping coupons or checking out discount payment apps like CrayPay that pays up to 10 percent of your bill. There also are coupon sites such as Passion for Savings and Hip 2 Save that can give you a money boost.

If you buy your beauty products at Ulta, join the rewards program to save money and always use an online coupon. Love Target? Get the Cartwheel app to stack up your savings.

Feeling weird about using coupons? Don’t. If Kristen Bell and other stars use coupons to stretch their income, anyone should. Coupons are a common way for everyone to spend their dollars wisely.

Financial success involves more than just getting a raise or hitting the big time with an up-and-coming stock. The road to becoming and staying well-off involves making smarter day-to-day decisions. No, you don’t want fries with that.

Ilya Pozin is the founder of Pluto TV, Coplex and Open Me.

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