How to Manage Money Like a Millionaire

Who wants to be a millionaire? Perhaps the better question, “who doesn’t want to be one?”

The fact remains that no matter your financial situation, good, bad or indifferent, everyone has those aspirations, whether fleeting or realistic, of being able to live comfortably.

Like a millionaire.

But the odds certainly are stacked again you as far as getting to that dollar amount.

If you look at the averages, that figure seems even more daunting.

Between the retirement ages of 55 and 64, the average person has just over $100,000 saved for retirement in savings.^[1]

That amount is nowhere near 1 million dollars, even though experts suggest that you’ll need close to a million dollars to be able to retire comfortably in the next 10 to 20 years, but of course that depends on your income (more to come on that one).

But just because you are looking down the proverbial barrel of a nearly impossible task doesn’t mean you can’t learn to save better, save like someone who is well on their way to being a millionaire.

Maybe getting to a cool million isn’t going to happen, but that doesn’t mean you can’t implement some of the best saving techniques used by others who have come before you that were able to get to that benchmark and then some as a result.

Ultimately, this isn’t just centered on retirement savings, either but also being able to save whether you’re in your 20s, 30s or 40s, too.

The idea of saving and managing money like a millionaire is part realism but also an abstract way of looking at money in general, something that can also be tangible based on how you go forward from here, whether it be budgeting, or just being able to curb spending.

People who are millionaires aren’t just bestowed that luxury because of a lucky investment, rich parents, NFL contracts or record sales. Thinking and subsequently acting as if you’re either a millionaire or en route to being one simply means putting money first, and the excesses later.

The masses still have the ability to take what they see from smart, financially prudent individuals and follow in those same savings footprints.

Rule of One: Why retirement starts with knowing what you need

Retirement often is where you’ll hear lots of chatter about saving money but mostly trying to ensure you have enough saved to last you throughout, so you’re not having to go back to work five, 10 or 15 years into retirement when you realize the money is about to run out, and you’re anywhere from 70 to 80 years of age.

That can’t be a fun place to find yourself, undoubtedly, and if you’re going to think and save like a millionaire, why not start with retirement savings?

The easy way to figure out what you’ll need and work backward from there is to use the 80 percent rule.

Far too often, those who are stashing money away for retirement do so with a fairly lackadaisical or passive approach, just choosing a percentage to put aside in their 401K and hoping for the best.

Fingers crossed aside, you have to do better than that.

This is why you start at what you need using the 80 percent rule.

Simply put, you’ll need to earn, yearly, about 80 percent of what you made while you were working. A $75,000 salary means you’ll need to make $60,000 per year in retirement, and then you’ll need to figure out where that money is coming from, be it social security, 401K payouts or pensions.^[2]

You don’t want to assume anything when it comes to retiring, and those who have been able to call it quits with a cool million dollars in the bank have certainly seen the numbers and stats to prove it.

For instance, if you need to generate $40,000 per year and you’ll be retired (and hopefully stay retired) for 30 years, you’ll need more than one million dollars to do that.^[3]

The first step to managing money like a millionaire is to make sure you don’t retire and find yourself coming up woefully short based on not only post work income but also taking into consideration living costs as well.

Rule of Two: Why budgeting has to include everything

If someone asked if you had a budget, what would your answer be?

“Yes,” would be the most likely of choices as an answer.

Having a budget is something that often is confused with having an “actual” budget or one that is being used at all. Those two sentiments go hand in hand, because only a realistic, actual and specific budget is going to work if you plan on saving money like a rock star (or in this case, millionaire).

The biggest oversight of anyone who is budgeting is that they assume budgets are only meant for big-ticket items, like your car, home or utilities, in addition to not understanding how to budget in the first place.

Let’s start with the latter.

But first, even more daunting news.

Only about 32 percent of households actually have a budget. Also part of that statistics is nearly 30 percent of people not saving one dollar of their income.^[4]

Not a good start; something is clearly not right if 32 percent are budgeting and 30 percent can’t save dollar one.

Here’s how to budget properly, overall: use the 50-30-20 rule

Use 50 percent of your budget for needs, 30 percent of your budget (after taxes for all of these) for wants, things you don’t necessarily need or can’t live without and 20 percent of your budget for debt repayment or putting money in your savings account.^[5]

Again, this is an easy, paint by numbers, budget plan without getting overly specific. It forces someone who isn’t budgeting or can’t save to rethink how they’re running their lives financially.

Here’s the other piece of why budgeting isn’t working for you: you’re forgetting about the “little things.”

Take food, for example. Yes, we still want you to eat, but consider that the average person spends $6,000 per year on groceries and while that is accounted for, the same person spends half of that on take out food, roughly $3,000.^[6]

If you aren’t budgeting that $3,000 on take out food and wondering why you can’t save, maybe it’s the nearly $300 per month you’re forgetting about from one take out box to the next.

The little things matter a lot.

Rule of Three: Automatic is awesome

Often overlooked by most (aside from millionaires) is just how important automating your financial life is when it comes to saving money.

You could make the argument that budgeting will always trump all as far as saving money goes, but once you have the budget in place you want, you’ll want to guarantee that your money is going to the right places each and every time you get paid or money is coming in, generally speaking.

Saving is almost always about routine, and for those who have found their way to becoming financially well off, they’ll tell you automation is paramount to their success, particularly when you consider how little people are saving.

Fifty percent of the United States is saving about 5 percent of their total income, while nearly 20 percent (18 exactly) isn’t saving one cent.^[7]

Those harsh, staggering figures only serves as a reminder that in order to save more you not only have to budget properly using a rule or not missing little things but also automatically sending money to your savings account.

The 50-30-20 rule says the 20 percent is for debt and savings, so the best advice has always been to save 10 percent of your income and put it in a savings account, and the best way to do it is to automatically set up that deduction from you paycheck, but more importantly pretend as though that money never existed.

If you’re someone who stands by the mantra that saving money is “hard” then what is easier than automatically sending money to an account? Granted, you may not have the extra money to do so, but that reverts back to topic 2 (budgeting) and eliminating expenses so you can make the 10 percent savings plateau a reality.

A more recent look at how we’re saving (a two-year period from October 2015 to 2017) shows that the two-year span saw a drop from 6.3 to 3.2 in monthly percentages being saved.^[8]

Those who save to become a millionaire don’t worry about cutting expenses as much as they do about being able to save in the here and now.

Rule of Four: Why it’s OK to be cheap (honestly)

Here’s the funny thing about people who are considered financially well to do and living comfortably.

They’re inherently cheap.

Don’t think so, maybe that’s a tale from beyond, something used as information to dismiss or assume it was concocted by those same rich folks.

Those who are financially comfortably don’t indulge on little expenses or things that would be considered depreciation pitfalls, as an example. They tend to be very frugal and smart with how they throw their money around, or lack thereof.

The average millionaire, for example, doesn’t drive a luxury vehicle, most of those are driven by those who haven’t reached that million dollar status. Roughly 86 percent of the population that drives luxury vehicles aren’t millionaires.^[9]

The key to becoming financial independent is modesty and moderation: you can’t get ahead of yourself spending wise, even if you have the means to do so.

So for the general public, if you get a raise, bonus or tax return, what happens to it? Bank? Savings account? Credit Union? Or does it go to tinting your windows on your car, a vacation you can’t afford to take or shopping spree?

The entire “think cheap” way of life doesn’t mean you can’t indulge, but it also is a stark reminder that money can do more for you in the long run, over time than being able to put your toes in the sand of a beach twice a year.

And thinking cheap even as a millionaire is how the rich stay rich, too.

Yes, they’ll spend money and have nice things, but as far as houses, cars and other items of that ilk, they tend to go on the cheap.

Three times more millionaires live in houses priced at or below $300,000 than over one million.^[10]

If that isn’t enough to tell you that thinking big means buying small consider Warren Buffett, one of the richest men in the world who kept his 2006 Cadillac for eight years, and still lives in the same house he bought for $31,500 in 1958.^[11]

If it’s good enough for a billionaire to think and spend this way, why not you, too.

Striving to become someone who is in the millionaire club is admirable, intelligent and shows a want and wherewithal to be successful financially.

Even if being at seven figures ultimately isn’t doable, the idea that you looked at that number as your barometer says something about your financial acumen.

What you’ve done, whether you reach one million dollars or not, is adopt what others have done before you, those who have reached financial freedom and success and tried to duplicate and capture that same savings essence.

Setting goals, ultimately, is what this comes down to. You’ve set a savings goal, used the aforementioned tips to perfection, and while maybe you didn’t reach the one million dollar plateau, chances are you’re in a much better position financially than you would have been had you done nothing.

The question of “who wants to be a millionaire?” is an easy one. Everyone, of course.

But perhaps the question needs answered with another question.

Who doesn’t want to think, act and save like a millionaire, too?