Everyone has heard the advice to live below your means, especially when you’re struggling to make ends meet. But does that same rule apply when you’re loaded? As it turns out, even millionaires like to stay frugal, too.
GOBankingRates spoke with self-made millionaires Tommy Mello, CEO and founder of A1 Garage Door Service and George Yang, founder and chief product designer at YR Fitness, to discuss the ways they live below their means.
“As a self-made millionaire, I’ve always believed that living below your means is key to long-term financial success,” Mello said. Below, both we explore he and Yang’s reasons for embracing this type of frugal mindset.
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Prioritizing Needs Over Wants
“One of the first steps I took was to clearly distinguish between needs and wants,” Mello said. “I make sure that my spending is focused on what’s essential, whether it’s for my business or personal life.”
He said this means not getting caught up in luxury or impulse purchases that don’t align with his goals. “I avoid unnecessary expenses that can quickly add up by focusing on needs.”
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Automating Savings
“I’ve automated my savings so that a significant portion of my income is set aside before I even see it,” Mello said. This helps him live on a predetermined budget and ensures that he’s consistently investing in his future.
“It’s easy to fall into the trap of spending what’s in your account,” he said, “but by automating my savings, I remove the temptation and build wealth passively.”
Smart Investing Over Spending
Rather than spending money on depreciating assets, Mello focuses on investing in things that grow in value, like real estate and his business.
This mindset shift from spending to investing has been crucial. “Every dollar I choose not to spend is a dollar that can be put to work in an investment, helping to build my wealth over time,” he said.
Keeping Lifestyle Inflation in Check
“As my income has grown, I’ve been careful not to let my lifestyle inflate accordingly,” Mello explained. “I still drive a reliable, used car and I don’t splurge on the latest gadgets or luxury items.”
Instead, he reinvests that extra income back into his business and other ventures that continue to generate more wealth. “It’s about keeping your lifestyle modest, no matter how much your income grows.”
Yang advised the same. “Avoiding lifestyle creep involves setting clear financial boundaries and sticking to them, no matter how much your income increases,” he said. “At YR Fitness, we encourage our team to adopt similar practices in their personal lives, emphasizing the importance of budgeting and mindful spending.”
One effective strategy Yang has employed is to automatically increase his savings rate whenever he receives a raise or bonus, rather than increasing his spending. “This ensures that my standard of living remains constant, even as my income grows.”
Additionally, Yang maintains a strict budget that aligns with his long-term financial goals, allowing for occasional splurges but within a controlled framework.
This approach not only helps him in avoiding unnecessary expenses but also keeps financial goals front and center, preventing the gradual increase in spending that often accompanies higher earnings.
“By living on a predetermined budget and directing any additional income toward investments, I’ve been able to grow my wealth while maintaining a comfortable yet modest lifestyle,” he said.
Mindful Budgeting
“I track every dollar that comes in and goes out,” Mello explained. “By being mindful of my spending, I adjust my budget when necessary and ensure that I’m always living within my means.”
This practice also helps him identify areas where he can cut back if needed, allowing him to stay financially flexible.
Surrounding Myself With Like-Minded People
Mello has found that surrounding himself with people who share similar financial values is incredibly helpful. “It’s easier to stick to frugal habits when your peers value the same things,” he said. “This community reinforces my commitment to living below my means and avoiding lifestyle creep.”
Living below your means isn’t about deprivation, Mello explained, it’s about making smart choices that align with your long-term goals.
“I’ve been able to build and maintain my wealth without falling into the traps of overspending or lifestyle inflation by focusing on what truly matters and staying disciplined,” he said.
Embracing a Frugal Mindset
According to Yang, living below your means starts with embracing a frugal mindset. “For me, this meant making conscious choices about where and how to spend my money, always keeping my financial goals in mind,” he said.
At his company, he’s applied a similar approach to his business operations, where every expenditure is carefully evaluated for its necessity and potential return on investment.
“Personally, I avoid unnecessary luxuries and instead focus on spending money on things that truly matter, like investing in my business or supporting my long-term financial goals,” he explained.
This disciplined approach has allowed him to build and maintain wealth over time without falling into the trap of lifestyle inflation. “By keeping expenses in check, I’ve been able to allocate more resources toward investments and savings, ensuring financial security and growth,” Yang added.
This practice, he noted, also reinforces the principle that true wealth isn’t about how much you earn, but how much you keep and grow over time.
“By embracing a frugal mindset, setting financial boundaries and taking practical steps to stay within your budget, you can achieve long-term financial success,” he said.
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This article originally appeared on GOBankingRates.com: I’m a Self-Made Millionaire: 7 Ways I Live Below My Means and Stay Frugal