- Lived well within their means
There are a few simple rules when it comes to managing your money and a key Golden Rule is to live well within your means and to ignore the Joneses. “Emotional spending can be the death of a family budget where some people will spend beyond their means to keep up appearances,” says Qualified Financial Adviser Frank Conway, founder of MoneyWhizz financial education services.
Case in point: Sylvia Bloom, a legal secretary from New York City that lived in a modest, rent-controlled apartment and worked into her 90s, bequeathed over $8 million local charities. And despite having amassed great wealth, still took the New York subway to work every day, even during some of the worst weather to hit New York City.
While the general rule of thumb is to save between 10 to 20 percent of your income, secret millionaires often put away much more—but they didn’t just save, they also understood the value of money declines over time so they invested their modest incomes to ensure it kept it’s buying power over time.
- Invested early and invested often
Secret millionaires know the benefits of being patient when it comes to investing. While this can be a challenge for even the most seasoned investors, those that are determined to build some wealth, even from modest incomes know that patience is a real virtue.
Since 1929, the US stock market has risen by about 8% when inflation is factored in. But other market indices have grown by far more and it is this rule that secret investors use to their advantage. Some secret millionaires held stock for 70 years or more, they stayed firm during the bad times, even buying more company stock when values were low. In fact, secret millionaires often reinvest their dividends which adds to the overall rate of growth over time through accelerated compounding.
- Squeezed more from their earning power
Secret millionaires are also inventive when it comes to earning income, after all, this is the original ‘seed money’ to any savings and investments strategy. For example, claiming back taxes on medical expenses and even using the benefits of Rent-a-Room relief (€14,000 per year) are some of the ways it is possible to earn some extra income (remember, this is the Government giving tax back so its free money).
- Ignored the image hype
Some of the biggest ‘everyday’ expenses people have during their lifetime are clothing and cars. In the case of one secret millionaire in the US Sate of Vermont, Ronald Read drove a used Toyota Yaris and parked at the edge of town thus avoiding the cost of paying for parking. He left over US$8 Million to local charities, wealth he generated from years of successful (and patient) investing.
“The question most people must ask themselves is what their purchase actually provides. Does it provide a need or a want; one may need a car but want a luxury brand and this is where financial loss happens all of the time” said Mr. Conway.
Living in a culture where celebrities are paid handsomely to promote goods and services all of the time, it can be a challenge for some people not to be taken in by the hype. Unfortunately, those are the same people that will never have that little extra cash to invest for the future.
Many secret investors took the time to understand the core issues of compounding growth, risk, diversification, the negative impact inflation has on the long-term value of money and so, they invest accordingly. Here in Ireland, many adults struggle with such basic concepts and as a result, make poorer investment decisions. But it is never too late to start and for those in their twenties and thirties, the time is perfect.