I interviewed 233 millionaires: Here's what I discovered about how they spend their money

"Being frugal means that you are making high-quality choices with your money."

Tom Corley is the author of "Rich Habits: The Daily Success Habits of Wealthy Individuals."
Photo by Eric Vitale

For my Rich Habits Study, I interviewed 233 millionaires over an almost 5 year period. Each of them had net liquid assets of $3.2 million or more and gross annual income of $160,000 or more. 

In my research I identified 4 categories of millionaire, based on how they made their money: the big company climber, the virtuoso, the dreamer-entrepreneur, and the saver-investor.

I've found that the saver-investor millionaire category has the fewest barriers to entry because you don't need to earn an advanced degree, log long hours at work to climb the corporate ladder, or take any big investing risks. You do, however, have to be careful and strategic about your spending.

If you want to be this kind of millionaire, I've found, work toward reducing your cost of living to 80% or less of your net pay. As a rule, the saver-investor millionaires saved 20% or more of their income and prudently invested those savings. Generally speaking, they were frugal.

No matter how much money you make, one of the main strategies almost anyone can use to feel rich, I've found, is to put an emphasis on being frugal. This doesn't mean that you are only spending your money on the cheapest items. Being frugal means that you are making high-quality choices with your money

Here is how the saver-investor millionaires in my study spend their money.

Housing: 25% or less of monthly net pay

For many, maintaining a home or apartment is often the most expensive part of the budget. When you keep the size of your home or apartment small, it can reduce how much you spend in mortgage interest, rent, real estate taxes, repairs, utilities, and insurance. 

However, location can also play a part in how much you will spend. Rent on a studio apartment in a city with a higher cost of living might be more out of pocket every month than a 2-bedroom or 3-bedroom home in a less expensive city. If you are able, strive to keep your housing costs below 25% of your monthly net pay.

Food, home basics, and sundry: 15% or less of monthly net pay

Food includes groceries and purchased meals for breakfast, lunch, or dinners that are nonentertainment-related. Housing basics include toiletries, house keeping items, laundry, and personal care products and services.

Cars: 5% or less of monthly net pay

Car expenses include monthly car payments, car insurance, gas, tolls, registration fees, repairs, and maintenance. If you don't own a car, depending on where you live, expenses for ride-shares, cabs, or public transit may vary.

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Clothing: 5% or less of monthly net pay

When it comes to updating a wardrobe, many Goodwill and thrift stores carry high quality clothing. Six of the millionaires in my study were fans of shopping at Goodwill. You may have to spend a few extra bucks on tailoring, but it is well worth the small additional cost.

Vacations: 5% or less of monthly net pay

The saver-investor millionaires in my study didn't deprive themselves of trips. Instead they took modest, inexpensive vacations. They searched for bargain vacation deals, or opted to purchase rental properties in beach towns, skiing areas, or lakes, and spent their vacations in those homes, which also could act as an asset with appreciating value. 

Entertainment: 10% or less of monthly net pay

This category includes bars, restaurants (dining out when it is safe to do so), and takeout, movies, music, books, and gifts. There are many restaurants that do not sell alcohol, beer, or wine and allow you to bring your own spirit of choice into their restaurant.

Restaurants can mark up liquor sales by as much as 100%, so BYOBs can help you save.

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3 more millionaire-approved saving habits 

Use coupons. Almost a third, or 30%, of the millionaires in my study used coupons to buy food. Why pay more than you have to on groceries or other expenses?

Don't gamble. Remember that gambling is high-risk speculation and often a tax on the poor. However, if you like to occasionally buy a lottery ticket, this would come out of your entertainment category of spending.

Seek out bargains. It is easy to make spontaneous purchases and end up paying more than if you had gone to the store or hopped online to compare prices first. Shopping for bargains and taking advantage of sales events around holidays are smart money habits.

Staying on top of your spending is not always a simple task. But once it becomes a daily habit, however, it gets much easier. You will fall into a routine that will enable you to save and put you on the path to financial independence.

Tom Corley is a CPA, a certified financial planner, and and holds a master's degree in taxation. He is the bestselling and award-winning author of "Rich Kids: How to Raise Our Children to Be Happy and Successful in Life" and "Rich Habits: The Daily Success Habits of Wealthy Individuals."

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