Ramsay Solutions’ National Millionaire Study, which surveyed 10,000 participants, shows that frugal millionaires, many of whom are self-made, don’t spend extravagantly or live off large inheritances.
The study concluded that high-net-worth households tend to live beyond their means, so they can invest strategically rather than live an inflated lifestyle as their income grows.
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According to these findings, frugal millionaires tend to practice consistent financial discipline and keep their total living costs to about $3,200 per month, which is typically less than what some middle-income families spend. This is a frugal millionaire’s monthly budget before retirement.
Joe Braier, CEO and president of Lake Country Advisor, said many smart millionaires save 15% to 20% of their income in savings or reserve accounts to prepare for future risks and preserve wealth. They view savings as an expense, especially as they approach retirement.
Consider this: How much does it cost to retire with a $100,000 lifestyle?
According to the U.S. Bureau of Labor Statistics (BLS), housing costs account for approximately 33% of high-income earners’ budgets. However, most frugal millionaires have their homes paid off, avoiding mortgage payments and compound interest.
That brings their housing costs to about $776 per month, or about 7 percent, including property taxes, homeowners insurance and routine maintenance, according to the Bureau of Labor Statistics.
Frugal millionaires pay attention to their daily energy costs, keeping major utility bills to around $300 per month, including electricity, gas, water, sewer and trash.
They often turn down the heat and air when they’re not home and invest in energy-efficient appliances and fixtures, such as WaterSense-labeled shower heads, which can save the average household 2,700 gallons of water per year, according to the U.S. Environmental Protection Agency (EPA).
Many frugal millionaires have cut the cord, choosing to forego expensive cable bills in favor of some of their favorite streaming services. They choose a basic cell phone plan with no bells and whistles, which averages $121 per month, and may bundle phone and Internet for a better price. Some of Fios’ lower-end internet plans start at $34.99 per month.
According to the U.S. Department of Agriculture (The U.S. Department of Agriculture’s (USDA) Thrifty Food Program costs approximately $477 per month. This means most meals are prepared at home, and eating out and food delivery are also controlled. Not all millionaires shop at gourmet stores. Surprisingly, many people buy groceries in bulk at Costco or shop at Walmart, Trader Joe’s and Aldi to save money.
When dining out, they may use their credit cards to earn travel rewards, such as free miles, to save money on vacation. They pay their credit card balances in full every month to avoid interest charges.
Frugal millionaires do more than curb spending. They actively manage debt and investments. GOBankingRates uses insights from financial advisors to learn how frugal millionaires juggle student loans, retirement and long-term investing.
Matthew Filepp, owner and president of PB Wealth, says most frugal millionaires want to have as little debt as possible, so paying off student loans is a necessity.
“Some typical debt repayment strategies include the snowball method (pay off the smallest balance first, then roll payments to the next loan) or the avalanche method (tackle the loan with the highest interest rate first),” Filepp explains.
Filepp said frugal millionaires tend to make 401(k) matching contributions to their companies if the company offers a 401(k) match.
“When they are below the MAGI income limit, they typically contribute at the Roth IRA contribution limit, and when they are above the income limit, they may continue to contribute using a backdoor Roth strategy,” he noted.
In addition to retirement accounts, frugal millionaires keep emergency reserves in high-yield savings accounts and invest excess cash flow in personal brokerage accounts, Filepp adds. This provides them with flexibility before and during retirement.
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This article originally appeared on GOBankingRates.com: What a Frugal Millionaire’s Monthly Budget Looks Like in Retirement