When most picture a wealthy person, they imagine flashy cars, the hottest brands and at least one huge house. This is the image of wealth that the media and advertisements have been pushing for decades. In reality, this description does not always correlate with how rich people actually live. Many dress in normal clothes, live in reasonable houses and drive common cars. You most likely know at least one wealthy person that keeps it completely hidden! In this article, we’re talking about frugal rich people and 7 secrets of wealthy people who live humbly.
What Is Considered ‘Wealthy’?
The definition of ‘wealthy’ is largely subjective.
According to the Federal Reserve (via CNBC), most people consider a person wealthy if their net worth exceed $2 million.
Others simply define wealthy as “being a millionaire”. For some, a person is rich if they’ve got a good job.
For the sake of this article, we’ll loosely define wealthy as having an income at least 4-5 times the average yearly income in the U.S. (via Wikipedia) with little-to-no debt, along with having six figures’ worth of investments, assets and cash combined.
This of course completely depends on cost of living, location and several other factors, but we’re pretty sure that most of us consider that to be wealthy – bills aren’t an issue, basic needs are more than covered and a good quality of life is possible.
As Forrest Gump says, “…there’s only so much fortune a (person) really needs, and the rest is just for showing off.“
7 Secrets Of Frugal Rich People: The Real Reasons Why They Live So Humbly
So what’s the deal with those rich people who don’t look or act wealthy? Why aren’t they living in a mansion with several luxury cars and a designer outfit? Here are a few secrets of frugal rich people that we can all learn from, or at least appreciate:
- Some Rich People Don’t Grow Up Wealthy
- Being Frugal Makes People (More) Rich
- Many Wealthy People Don’t Try To Appear Wealthy
- Rich People Spend Their Money On Assets
- Many Are Already Happy Before Becoming Wealthy
- Wealthy People Recognize The Value Of Time
- Self-Made People Have Patience & Discipline
Let’s go through some details about each of these topics. Scroll to continue!
1. Not All Rich People Are Born Wealthy
Think every rich person is born with money in their pockets? Think again.
According to Wealth-X (via CNBC), over two-thirds of the 265,000+ ultra-wealthy studied are self-made millionaires (or billionaires!).
Wealthy people who aren’t born rich have to struggle for many years in order to become truly wealthy. This struggle comes with sacrifice – saving money, working hard, putting money into themselves and not spending frivolously.
Living in this manner for a meaningful period of time is bound to create some deeply-rooted habits and beliefs – this includes the importance of hard work and focus, not spending money like crazy. In turn, these now-wealthy people know what it’s like to live simply!
Read Next: Is Minimalism For The Rich? 5 Common Opinions & Our Honest Thoughts
2. Frugal Rich People Started Out As Just ‘Frugal People’
We highly recommend reading ‘The Millionaire Next Door‘. If there’s only one lesson you take away from this book, though, it’s this: if you want to become wealthy over time, live below your means.
We all hear this expression ad nauseam, but it’s for good reason – by spending significantly less than you make, money starts adding up…fast.
Saving money becomes a habit. Searching for a great deal or the best value before making a purchase ensures you get the most out of every dollar. Buying only what you need becomes a mindset.
With all that extra money accumulating every month, a person finds themselves with quite a bit of money over a long enough period of time!
Frugal rich people became rich BECAUSE they’re so frugal, not the other way around.
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3. Many Wealthy People Don’t Try To Appear Rich
Do you know someone who spends thousands on clothes, cars, vacations and the latest stuff, yet they have no savings, investments or assets? They’re trying hard to appear rich. They want people to see them as wealthy. Feels good, right?
Not really. At the end of the day, living this way is stressful – not only do they have no money, but they feel so much pressure to appear a certain way. That’s a lot of anxiety for no real gain. Social media apps like Instagram and the like make this a whole lot worse.
If someone’s actually wealthy, why do they need to show it? They really are wealthy and they know it – they don’t feel the need to show off. When one actually has money, the need to make others think so often falls away.
Read Next: 7 Reasons Why People Become Obsessed With Material Possessions
4. Rich People Spend Money On Assets (First)
In the previous section, we discussed expensive cars, toys and other luxury goods. In the world of personal finance, these are known as liabilities – things that cost money, for simplicity’s sake.
The opposite of a liability is an asset – something that holds intrinsic value or generates income, in basic terms.
Wealthy people spend their extra money on assets, and they often get wealthier though these assets or by purchasing more assets over time. Here are a few examples:
- Investing money in stocks, bonds and mutual funds
- Creating businesses that generate income
- Buying things that hold or increase in value, such as precious metals, cryptocurrencies, etc.
- Purchasing real estate for rental or flip purposes
While most of these assets don’t appreciate in value overnight, they certainly make more money than money sitting in the bank (most of the time) and DEFINITELY generate more wealth than buying consumer goods that lose all their value.
Read Next: 15 Biggest Unnecessary Wastes Of Money
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5. Many Wealthy People Were Already Happy Before Becoming Rich
Many people strive to obtain material possessions because they believe these things will bring them happiness.
“When I can finally buy a house, then I’ll be happy.”
“I must have the newest smartphone/computer/whatever when it comes out.”
“It’ll feel so good when I finally get that new car…”
See a pattern? These people all want the same thing – happiness. Sure, buying things can bring happiness for a time, but it always fades.
As stated earlier, becoming a self-made wealthy person requires discipline and hard work. Many wealthy people learn to be content – and even enjoy – “the ride” towards becoming wealthy. Experiences and simple pleasures become the source of happiness. They don’t let their happiness in life depend on buying that next cool thing.
Many frugal rich people stay frugal, because they’re happy before they’re wealthy. They don’t feel the need to buy that happiness.
6. Wealthy People Recognize The Value Of Time
Let’s reference a source of infinite wisdom: Caddyshack.
“I said to myself: Al, if you keep busting your hump 16, 20 hours a day and you’ll end up with a $60 million funeral!”
Here’s another quote from the Notorious B.I.G. “Mo money, mo problems.”
Annnnnd one more from Fight Club: “The things you own, end up owning you.“
We can learn a few things from these quotes:
- If you spend all your time making money (shout out to The Eagles), you’ll never actually enjoy it.
- Living a lavish lifestyle comes with issues – larger expenses, spending time managing those expenses and having more to worry about overall.
- The things you own take up a lot of time and energy. The more you own, the more time and energy gets spent on them.
What’s the answer? Focus attention and money on maximizing the amount of time we have in our lives, along with making sure that time is the highest quality possible.
A byproduct of prioritizing the quality and quantity of time we have available is that we no longer care about ‘having stuff’.
A simple, high-quality life becomes more important – in fact, this is one of the fundamental principals to our mission!
Time is the one thing that nobody can get back.
Also, the amount of money one can make via compound interest (investments and savings alike) over enough time is a beautiful thing!
Read Next: 6 Philosophies of Minimalism Realized During COVID-19
7. Self-Made People Have Patience & Discipline
We’re living in the age of instant satisfaction.
We’ve become used to the conveniences of availability, choice and speed (hello, internet).
While this applies to basic needs like information, food and other daily necessities, it doesn’t stop there.
Want a nice car but can’t afford it? Companies will happily sign you up for a longterm, high-interest loan, which will probably outlast the life of the car.
Feel the urge to buy expensive clothes, devices and ‘toys’ but are short on cash? Credit card companies will gladly lend you the money now for a lot more money back in return. They’ll still be collecting interest when that luxury item becomes yesterday’s news.
Looking back at earlier sections, we already know that most wealthy people aren’t born rich. We also know that wealth is achieved through wise investing and living below one’s means. Doing this requires patience and discipline.
Frugal rich people tend to have both. While a fraction of people become overnight successes, most rich people accumulate their wealth over time.
The ability to say ‘no’ now – despite peer pressure and inner desires- in order to have more later is a core tenet of become a self-made wealthy person.
Read Next: What Is The Minimalist Lifestyle?
Frugal Rich People: In Summary
We hope this article has been both informative and eye-opening. While the media and advertising has long correlated wealth with material possessions, it’s simply not how many wealthy people live. Even if they do, wealthy people only begin to indulge long after living as outlined above. The next time you see a wealthy person driving a 7-year old car, wearing normal clothes and living in a regular house, you’ll probably see them in a whole new light!