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|The Frugal Trend: Live Like a Billionaire|
|Monday, 20 September 2010 16:00|
Living frugal and within the means of one’s finances are factors that contribute to the ability for individuals to experience financial freedom. Would it be a surprise for you to learn that many of the richest people in the world are living their lives way below their spending capabilities?! Simple things such as their homes, cars, clothes, and other spending habits are done in ways that do not truly represent their purchasing power.
Yahoo recently did an article discussing the habits of average billionaires and the shock to the majority of readers was that they live like every day average people with the ability to spend more money in a day than the average person could spend in a lifetime. Warren Buffet, one of the richest men alive, still lives in the house that he purchased in 1957 for 31,500 dollars. This is staggering when you consider the average American spends 34.1 percent on living accommodations. Warren Buffett made 253.16 mil lion dollars in 2006 and would have to spend roughly 86 million dollars a year on his housing to live like his fellow American and yet today he spends absolutely nothing on it. How would you be spending your money if you made 253.16 million dollars in one year and was worth close to 50 billion dollars?
Another famous billionaire Mayer Bloomberg, who happens to be the richest man in New York City, has been wearing the same shoes for 10 years. Actually, he has two pairs of shoes that he likes to rotate every other day. Instead of buying new shoes when they get worn down, the richest man in New York City resoles them. He also is known to always buy only what he needs. For example, when it comes to his morning coffee, he only buys a small because it is just enough to keep him happy. Most Americans would consider this being cheap, but in the eyes of some of the richest men, valuing what you own and not overspending is not only a virtue, but a lifestyle.
As time goes by, Americans are going to be forced to live more frugal modest lives due to current economic conditions that are facing them. As ironic as this might sound, they will be forced to live more like some “billionaires” of the day.
Seeing the economy drop into an economic devastation has indeed brought many of the giant car companies to its knees with new car sales depressed. Programs have been implemented to stimulate new car sales, such as, Cash For Clunkers. But the facts are the same, people are unemployed and do not have the money to go out and purchase new cars. Bloomberg News reported that August 2010 was the slowest auto sales month in 28 years.
For the last several decades it has been the norm to go out and purchase a brand new vehicle every five years, but this is not going to be as realistic during the frugal trend. In fact, AutoMD conducted a recent survey and found that 77 percent of people intend on keeping their cars for another 50,000 miles. The question is where are the economic winds blowing and who is profiting from the collapse in the auto industry? People are being forced to do basic maintenance on their cars in the comfort of their garage or having to pay a mechanic to repair and maintain their mode of transportation. This costs money, but is still cheaper than going out, falling into debt, and enduring financial distress for the next five years of one’s life for the new car smell. FutureMoneyTrends.com believes that unemployment will remain high for a number of years and individuals will be forced to live their lives frugally and do things themselves. This is a rather o dd concept for many who have maintained a much higher standard of living for so many years. Small and large businesses that specialize in repairing and maintaining are positioned to succeed through this trend. Because transportation is essential in many cases for one’s ability to work, mechanics specifically will be in demand to keep Americans on the road in an economic and efficient manner.
1. Pay down your debt and shred your credit cards. According to CardWEb Inc, the average U.S. household has 11,000 in credit card debt. Having credit cards in your wallet can add fuel to the fire, tempting some to use their credit card for everyday expenses. When it comes to consumption debt, our recommendation is unless you can pay for that meal or vacation in full when the bill comes, don’t charge it. With interest rates and negative amortization, the last thing you want to do is pay interest on a salad that you ate 3 months ago.
2. Buy used. Before going out and purchasing something without of box premiums, look for the same item on the used market for a significant discount. For example, when purchasing your next vehicle consider buying a used one. Not only is the purchase price lower, but the depreciation is already priced in so the value won’t collapse after your purchase. Vehicles today are much more reliable, the 100,000 milestone isn’t much of a milestone these days. Cars that are properly maintained can go hundreds of thousands of miles with no major repairs.
3. Learn to cook and enjoy more meals inside the house instead of going out to eat. Not only will you get the satisfaction of a homemade meal, but you will also save time and money. According to Nola Inc., Americans can save up to 1,440 dollars per year by grocery shopping and making your own meals. There are also health advantages because you can choose the nutritional value of what you eat.
4. Purchase your groceries with coupons and buy generic. According to U.S. News individuals can save a huge 10 to 50 percent on every shopping trip just by switching from buying name brand items to buying generic. When purchasing name brands, you are paying a premium built into the price that goes toward advertising, marketing, and reputation of a product. You still in many cases are getting the same exact product by going the generic route but side stepping the premium charges. In many cases, the generic brand is made by the same company that makes the name brand. An extra 10 to 50 percent each time you shop for your groceries is large enough to give you huge yearly savings that’ll indeed make financial impacts on one’s portfolio.
5. Prepare a monthly budget and stick to it. According to an annual survey conducted by CareerBuilder and Harris interactive, they found the number of Americans living paycheck to paycheck increased from 43 percent in 2007 to a shocking 77 percent in 2010. Not having a budget leaves the opening for financial disaster and frustration. This leads to over spending and typically deeper uncontrollable debt. Just like going on a severe unrealistic diet, you don’t want to go from pastrami sandwiches everyday to sprouts and green beans because you’ll last for a short period and fall back into old bad habits. Having a budget to guide your purchasing habits keeps your spending under control and ultimately gives you the peace of mind that so many people strive for but never truly achieve.
6. Take a lunch to work instead of eating out. According to the Brown Bag Challenge on MSN, people who packed a lunch reported a weekly savings between $20 and $100 dollars. Make time to pack a lunch or cook a little extra the night before in order to have leftovers for lunch. Even though food prices continue to rise, it is more cost effective to bring your brown bag to work instead of eating out each day. If you do find yourself out to lunch, consider ordering water and possibly sharing an entree. According to FeedthePig.org, restaurants make a lot of money from the high markup of their drinks and often have huge serving portions that can be shared.
7. Determine what your needs and wants are. Ask yourself, “Can I live without it?” If you can, it is a want, if you can’t, it is a need. Do not be an impulsive buyer and allow your emotions to make your financial decisions, but rather think things through before you make a purchase. Is it essential or non-essential?
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