Bright Side

How I Decided to Adopt Some Financial Habits, and Why I Won’t Use All of Them in Real Life

When someone talks about the lives of billionaires, you start imagining a beautiful picture: a man in an expensive suit, lives on a huge yacht, surrounded by models with long legs. However, most rich people live simple lives, they wear the same pair of shoes for several years, they go to fast-food restaurants, and they use public transportation. Maybe this is why they are so wealthy?

Especially for Bright Side, I tested the financial habits of millionaires on myself. And I can’t say that all of them can and should be used in real life. At the end of the article, there is a bonus for you.

Learning and doing things on my own

David Cheriton, one of Google’s investors, follows this rule. He doesn’t go to a hairdresser, he cuts his own hair by himself. Try doing something by yourself. You can start small: change the broken part on your water tap yourself, or change the wallpaper in your room by yourself without any outside help.

I decided to cut my cat’s claws on my own. I bought a claw cutter at a pet store and I wrapped the cat in a blanket to immobilize it. The entire procedure took only about 2 minutes. But cutting my own hair was something I couldn’t do. However, I found some amateur hairdressers among the people I know. They needed a model to practice on. The new haircut was 2 times cheaper than it would’ve been in a salon. And I got a chance to see my old friends.

Buying things according to your status

Michael Bloomberg, ex-mayor of New York, wears the same 2 pairs of shoes for several years. He doesn’t see a reason to spend his money on anything else. We should change our attitude toward spending money and instead of buying the things that are trendy, we should only get what we really need. This is a very important tip, given the fact that the new iPhone has been released.

So, after looking at all the shoes that I have, I decided not to spend my money on another pair of cool boots that I don’t need at all.

Investing in yourself

Billionaire Warren Buffett, whose fortune is estimated to be $27 billion, thinks that investing in yourself is one of the best ways to save money. You need to invest in your health, education, and career. All the money you invest will return to you 10 times more. Everything that makes you smarter, makes you richer.

I started taking foreign language classes. A one month membership cost me $50. It seems to me, this is a great way to invest in education. I have calculated my monthly expenses:

  • coffee to go — $20;
  • going to cafes — $32;
  • taxi — $15;
  • spontaneous purchases (one more facial mask, some food from the nearest bakery, ice cream in the park, etc.) — $13.

I realized that the money saved by cutting down on unnecessary expenses can be spent in a useful way. We will be able to see how successful my investment was in a few months. I am not ready to stop using the taxi or stop eating at the bakery, but I’m working on cutting down my expenses as much as possible.

50/30/20 rule

Harvard bankruptcy expert, Elizabeth Warren, named by Time magazine as one of the 100 Most Influential People in the World, made up the 50/30/20 rule. She recommends a division of your income in this way:

  • 50% of your income should be spent on the things you can’t avoid buying: bills, medications, food, car, mortgage, etc.;
  • 30% should be spent on your household needs: buying clothes, music subscriptions or an online movie service, buying dishes;
  • 20% should be spent on paying off debt or be put aside and saved.

I made a list of monthly expenses and split them into the necessary ones and some that are less important. The necessary expenses include bills, food, my credit card payments, my pets, transportation, and the internet. The other expenses turned out to be less important. I couldn’t fit them into the 30%, so I had to give up on some of them. For example, coffee to go was replaced by a travel mug, and I started going to the bakery less often.

Most likely, I am not going to use this rule anymore. It is hard to fit the bills, food, and medications into the 50%, but this experience made me reconsider my expenses.

Finding several sources of income

Writer Thomas Corley studied the habits of rich people. He found out that most of them had more than one source of income. It doesn’t mean you need to go out looking for a new job. You can try to earn money with something you can do well.

I remembered that I can sew and take photos. I took a sewing machine from the closet and offered all my friends my services in fixing their clothes: I can shorten pants, change the zipper, and things like that. A couple of people were interested in my services.

Before the start of the new school year, there were some people that wanted my photo services: there were several celebrations that hired me. The most important thing is to not be afraid of posting information about what you can do on social media. I used the money I earned to buy a bookshelf and I put some money aside for the renovation. But don’t spend all of your free time doing extra work. You might burn out fast. In that case, you won’t even be able to do your regular job.

Buying things together with someone

Actress Hilary Swank cuts out coupons from newspapers and exchanges them for food in supermarkets. There are a lot of different promotional activities (like “1+1=3,” or “Buy the second product for $ 1,” or “a 50% discount for the second product”). You can learn about them from supermarket websites, social media, and other sources.

I ran out of my favorite cream and I was lucky to find out that there was this “2 = 1” thing. I asked my mom to help. She also needed cream, detergent, and shampoo. We bought a huge cart of things with a 50% discount.

The “1 + 1 = 3” promotion is even better. I found the people that wanted to use this coupon on Instagram, I published a story, contacted a girl I knew, and went to the store with her. Aside from saving some money, we met, talked, and had a great time.

Talking to sellers

IKEA founder Ingvar Kamprad, who was believed to be the richest person in Sweden, lived a simple life. He used public transportation, he went to cheap cafes, and he haggled at street markets. He died in 2018. Half of his fortune was donated for the development of the northern lands of Sweden.

In order to feel like Kamprad for a moment, I went to the city market. If you come several hours before it closes and have a nice chat with the sellers, you can get a discount. People that sell meat and dairy products are very happy to give you a discount. The advantages of buying things in the market are that there is a lot of variety, good prices, and a chance to negotiate the price. I paid 30% less for a pound of pork that I would have if I had bought it in a supermarket.

Bonus: Several more tips on saving money

  • The 24 hour rule. Before you buy something expensive, give yourself 24 hours to think. Impulsive purchases are often useless.
  • Have no-expense days. Make a plan of purchases for the week and choose several days when you don’t spend money. This habit will help you plan your budget.
  • Don’t chase easy money. Remember that doubtful financial offers may leave your penniless. Even stock markets are really risky, let alone “jobs with high wages for moms on maternity leave.”
  • Meet new people often. Communication is the currency of rich people.

Do you have your own ways of saving money? Which tips do you use and which tips don’t work for you?