Curio Lists
How to Save Money Like a Billionaire
Saving money is really, really important these days. We don't know when disaster will strike us or where we'll get money for our retirement. Every generation grows up hearing about how Social Security and Medicare may not be there for them in the future. These are called "Entitlement Programs" because the laws that created them say that as a citizen who has paid his or her taxes, you are entitled to receive these benefits for the rest of your life (after you reach retirement age).
Of course, billionaires don't depend on Social Security and Medicare for their retirement needs. They are billionaires. But even though they have a lot of money they are very clever about how they manage their money. I have learned a few of their basic secrets for these things. Let's take a look at what you and I can do that billionaires would do if they suddenly had to live on our incomes.
Invest Wisely in Stocks and Bonds This is not glib advice. You can speculate like a billionaire who can afford to lose money but you don't have money to lose. Hence, the best thing you can do with your spare change is to invest it wisely. That means taking as few risks as possible. It also means going for real growth in value. Sometimes there are ways to achieve the same thing.
Warren Buffett once wrote that if he died before his wife his advice to her would be to put 90% of the money he left her into a Standard & Poor 500 index fund and just live off the dividends. Ever since then people have been pouring more and more money into index funds. But for people with limited incomes that is not really possible because there is a catch: you have to have a lot of money (at least a few thousand dollars) before you can start investing in the stock market.
Well, that is not entirely true. For example, you can look into low-cost dividend reinvestment fund options. The idea is simple. You find a solid, stable company that will be around for a long time and buy small portions of stock directly from that company. As they pay dividends they'll take yours and reinvest them for you in their own stock. This way you can build up your investment in a company over the years. You could put together a nice portfolio of 5-20 stocks this way but if you're only investing $10 a month in each stock, you'll have to come up with $200 per month to keep adding to your portfolio. Not everyone has that kind of money.
Most Americans don't have even $500 in savings and they say they cannot afford to add even a $100 per month medical bill to their budgets. If you cannot pony up $100 for necessary medical expenses every month, where are you going to get $200 to invest? The math just isn't working out.
Fortunately for all us little guys there are some better choices. You should read this article on microinvesting because it explains a lot of things. You can invest as little as $10 per month in index funds thanks to the new (and growing!) microinvesting industry. That's fantastic! It's exactly what we need.
Save Money When You Travel Everyone travels. It's not like we get to take big cruises every year, although you'll occasionally find some $500 specials. Most of us travel by packing the kids and the pets into the car and driving along America's great Interstate Highway system. We visit national parks, distant cities, theme parks, etc. (It's no wonder we don't have any money to invest.) You could try to stay in nice hotels at discounted rates or you could limit your vacation travel to local attractions. Some people do that.
There are hundreds of ways to save money and time while traveling. When you want to think like a billionaire you need to assume that someone is willing and able to help you save time and money. To the wealthy time is money, so every savings helps. Use your time wisely because you'll never be able to replace it. Time is the only irreplaceable resource even billionaires have to live with.
Another lesson we can learn from Warren Buffett is to not live ostentatiously. Yes, some billionaires spend millions of dollars building expensive homes but many of our wealthiest people live in modest homes that you and I could pay for. Don't force yourself to think in terms of "trading up" all the time. You should learn to be happy where you are, or find a comparably priced home where you can be happy. Many families trapped themselves into large, expensive mortgages by constantly trading up. They did this for "tax savings" but, honestly, how much do those "tax savings" cost you in higher interest and maintenance costs?
Borrow Money for Free Warren Buffett does this because he owns an insurance company. We don't all have that option. But there are ways you can borrow money so that it costs you nothing. For example, if you want to try your hand at flipping houses you'll need to know how people finance their house flipping businesses. The way billionaires do this is they borrow enough money to cover all their expenses until they sell their investments. Then they make sure they sell those investments for more than their borrowed money cost them. House flipping may not be the best option for you, but it is possible to get enough money to buy an inexpensive home and then fix it up. NOTE: Don't try to be the repair contractor yourself. Hire professionals to do this and assume you'll have about $20,000 in various fees you have to cover beyond the renovation costs.
Spend Other People's Money, Save Your Own This is what it all comes down to. If you want to save money like a billionaire then think of ways you can keep putting your money into savings and still cover your expenses. The rich guys do that by borrowing money that they plow into investments which not only turn profits but cover their costs. It takes a while to get the hang of this. I am working on it.