Rich people live within their means and by being frugal. Picture / Getty Images
Rich people live within their means and by being frugal. Picture / Getty Images
Andrew Woodward is a mindshift.money accredited money coach based in Sydney
When I was younger I was living under an illusion that shaped what I thought I wanted in life.
But I've realised I've been lied to.
Rich people might look like they live extravagant lives, always dressed in expensiveclothes and travelling in style ... but the people we're looking at as "rich" are more likely "rich and famous", and getting some of these things loaned to them for the cameras.
In reality, most rich people are actually quite frugal.
And if we want financial freedom, we should emulate this frugality.
Frugal isn't exciting
Sometimes, being frugal is referred to as being tight with your money and therefore comes with a heap of negative connotations. Who wants to be known as the tight one in the group, right?
But the opposite of frugal is described as wasteful. When it comes to money, being wasteful is reflected in lavish spending and hyper-consumption.
The problem we have, and the basis of the illusion that we have been living under, is that being frugal isn't exciting.
It is a lot easier and more fun for social media and television to promote flashy lifestyles.
We are led to believe that if you have money, you spend lavishly, and if you don't show it, you don't have it.
The more we make, the more we want to spend. It's the instant gratification gene kicking in again.
Well, it turns out the reality of the rich person is a completely different picture.
Live below your means
In my time studying and researching smart rich people, one of the most striking lessons I learned is that they all live by one mantra: Live below your means.
The rich understand that it is difficult to support a high-consumption lifestyle and become a millionaire, or to achieve financial freedom.
So to manage their spending, to achieve living below their means, the rich all have this rather surprising habit.
Not only do they live below their means, they do it by being frugal in a smart way.
Instead they are more likely buying second-hand cars instead of new, or they are buying clothes from the same shops that you and I do, and not from Rodeo Drive. Picture / Getty Images
When it comes to lifestyle spending, they are not like what you see on television or social media.
Instead they are more likely buying second-hand cars instead of new, or they are buying clothes from the same shops that you and I do, and not from Rodeo Drive.
You see, the lavish lifestyle can only be maintained while you are earning the big money. If you aren't taking steps to build for your future, then eventually the lavish lifestyle has to end.
There are many examples of people who have suffered this outcome. It's been argued that Michael Jackson, a known hyper-spender, passed away virtually broke.
The reality of rich habits
Now I don't want to paint a picture that getting rich is simple. In fact, that is part of the problem for most people.
They see the actors, music and sports stars who come into large amounts of money quickly, live the rich lifestyle and think that is how success with money is achieved.
It is also why get-rich-quick schemes are so successful in taking your money. People are looking for the quick result.
However, the reality is that the true rich people, the ones who start out just like you and me, they know they have to work on their habits.
It's like a runner that is fit — they run to stay fit even though they don't look like they need to. They have developed discipline and understand that they have to keep it up to remain in good condition.
Becoming rich and achieving financial freedom is about traditional values of hard work, discipline and, at times, sacrifice.
Living below your means in modern society is damn hard. The desire to keep up with your friends and the pull of instant gratification are temptations that are difficult to resist.
What I have learned the hard way, is that the smart and efficient path to financial freedom is to live below your means, to be a little frugal when it comes to your lifestyle and to make these your habits.
Next time you are out, have a look around you. That person who looks just like you could very well be a multi-millionaire enjoying the financially free lifestyle that you are striving to achieve.
Andrew Woodward is a mindshift.money accredited money coach based in Sydney who teaches people to take control of their money and invest for their future, simply and efficiently. Sign up for his free weekly money tips at his theinvestorsway.com.au.
