7 Ways To Budget And Invest Like A Wealthy Retiree

Build Wealth by Focusing On How Much You Keep- Not How Much You Make

Woman budgeting on laptop
••• @Lesia.Valentain via Twenty20  

When it comes to building wealth, it actually has less to do with how much you make and more about how much you keep. That’s a universal truth regardless of your income or net worth. In fact, many wealthy retirees live by that philosophy. The way that you budget and invest can make the difference between living a life with plenty of money and living a life with financial stress. Most wealthy people have taken one or more of the steps below to ensure financial stability: 

1. Live Below Your Means 

There’s an old saying: “Never peg the needle on your spending meter.” Honestly ask yourself why you are considering buying something bigger, newer or flashier. Happiness? Status? A sense of self-worth? In the long run, you may get more gratification from keeping your money in the bank if all your reasons are superficial and not based on a genuine need. Maintain conservative spending habits even if you get a raise or otherwise come into money.

2. Shop Smart

​Financially successful people avoid paying full price for anything. Adopt this mentality and always look for smart ways to decrease your daily expenses. The wealthy proudly shop at stores like Walmart and Aldi for their daily expenses and will take the extra five minutes to buy cheap gas at Costco. This is true even when wealthy folks decide to splurge.

3. Don’t Indulge in Fancy Toys

In the market for a Mercedes E-class? Wouldn’t you enjoy a 2014 model as much as a 2016 model? Keep in mind that wealthy retirees don’t necessarily own BMWs, Mercedes, $3,000 watches, or $5,000 suits. Nearly 40 percent of them buy used cars. In fact, many millionaires are conservative with their spending. Many retirees who are both wealthy and happy drive cars like Toyotas that are easy to maintain and easy on gas.

4. Pay Off Your Mortgage

There are a lot of ways you can pay your mortgage off. Try to pay it off in full without dipping into your retirement fund. If you can’t pay it off in full all at once, make larger payments of $100-300 each month. Those slightly larger payments can shave a full decade off a 30-year mortgage. Wealthy and happy retirees tend to enter retirement without a mortgage or at least know they will pay it off within five years. According to research from You Can Retire Sooner Than You Think, the average price of the happiest retirees’ homes surveyed was $355,000, proving you don’t need a mansion to be happy.

5. Save Your Raises

While it’s tempting to spend that extra money on a vacation or a new car, instead consider saving at least half to pay taxes or put it in your retirement or brokerage accounts. It will compound for a larger return later. The wealthy see raises as opportunities to increase their overall wealth rather than just some extra short-term spending money.

6. Avoid Temptation

Leave your credit cards and wad of cash on the dresser when you go shopping and stick to a list. Limiting your options avoids impulse buys and over-spending. This tactic is especially helpful if you are going to the mall or Costco. True story: Energy billionaire T. Boone Pickens makes a shopping list and carries only enough cash to buy what’s on that list. Liquidate your junk. Clean out the basement, garage and tool shed. Sell off what you don’t need or use. Yard sales are a blast. But if that’s not your cup of tea, donate your clutter to charity and take a nice little tax write-off.

7. Invest For The Long Haul

Get rich schemes won’t help you accumulate the wealth you desire. Focus on working with a trusted advisor who can present you with options that will serve as long-term investments. Be sure to ​diversify and pay attention to the market– but don’t react to every market correction that occurs.

Bottom Line

The wealth mentality is not as mysterious as many people think. Small tweaks, goal setting and long-term financial planning can move you one step closer to a wealthy retirement.