By Mark Ford, founder, The Palm Beach Research Group

Monday, August 15, 2016

I grew up relatively poor, the second of eight children. My father earned $12,000 a year as a college professor. As a teenager, I was ashamed of our small house, my hand-me-down clothes, and my peanut butter and jelly sandwiches.

I dreamed, literally dreamed, of living like a rich man.

And so, when I got my first job at age 9 as a paperboy – and then at 12 as a lackey at the local carwash – I would spend my money on luxuries, like a pair of brand-new Thom McAn shoes.

I worked every chance I got while in high school, and then worked two or three jobs during college and graduate school. I spent 80% of my money on necessities: food, clothes, and tuition. But I always spent a bit on little extravagances. Even back then, I had the notion that I didn't need to deprive myself now for some better life later.

I tell you this to emphasize a key part of the simple money-management system I've used to generate millions in wealth...

I don't believe in scrimping severely to optimize savings. I believe you can live a rich life while you grow rich, so long as you are willing to work hard and stay smart about your spending.

Think of the typical earning/spending/saving patterns of most wealth-seekers...

During their 20s, they spend every nickel of their modest income to make ends meet. At that age, it is nearly impossible to put aside money for the future.

During their 30s, their income increases. But this is also when they start a family. Expenses soar. There are more mouths to feed, a "family" car to buy, and the dreaded down payment on a first house. They manage to save a little during these years, but not nearly as much as they thought they would.

If they work hard and make good career decisions, their income climbs much higher in their 40s and early 50s. They have more money to put aside for the future, but they are also tempted into buying newer cars, nicer clothes, more exotic vacations, and – the biggest wealth-stealer of them all – that dream house.

In their later 50s and 60s, their income plateaus or even dips... And they may have to start shelling out for college tuition. Aware that their retirement funds are being depleted rather than enhanced, they invest aggressively to try to make up the difference.

Finally, sometime in their mid- to late 60s, they realize that they don't have enough money to retire. They have spent almost 40 years working hard and chasing wealth, but they never managed to attain it.

It's sad, but it's the reality for most people. And it is just as true for high-income earners (doctors, lawyers, etc.) as it is for working-class folks.

There are two lessons to be drawn from this:

First, it is very difficult to acquire wealth if you increase your spending every time your income goes up.

Second, setting unrealistic investing goals means taking greater risks. And taking more risks, contrary to what many pundits say, will almost always make you poorer... not richer.

The truth is, there is only a marginal relationship between how much you spend on housing, transportation, vacations, and toys and the enjoyment you can derive from them.

My spending strategy is simple: Discover your own, less expensive way to live a rich life. By a "rich life," I mean a life free from financial stress, but also filled with things that give you pleasure.

The fact is that you can own and enjoy the world's finest things – the things that make life luxurious – for a tiny fraction of what a billionaire might pay. For example...

•	You don't have to "pay up" for a $175,000 Savoir Beds mattress. You'll sleep just as well on a $3,000 Stearns & Foster Silver Dream mattress – or on one you can make yourself for $1,000.

•	A bottle of 1989 Château Haut-Brion will set you back $1,700. But a Crozes-Hermitage White Petite Ruche 2012, which scored a 92 on Wine Spectator, will taste nearly as good and only cost you $30.

•	You could cough up $140,500 on a Maserati Quattroporte. Or you could spend $40,000 on a used BMW 760Li that, I think, is more beautiful, comfortable, functional, and durable.

•	Everyone dreams of spending a few $1,500 nights in the Hôtel Barrière Le Fouquet's. But I guarantee you'll have a better, cozier, "richer" experience at a $300-per-night bed and breakfast.

•	Your family can be just as happy in a house that costs $100,000 or $200,000 as opposed to one that costs $10 million or $20 million.

•	Brand names are parasites that gobble up wealth. You could buy off-brand items that work just as well or better and save tens of thousands of dollars while losing none of the prestige.

•	You could have all the glamor of eating a $200-per-person meal at NAOE in Miami. But you can get better food and a much better experience by hiring a private chef to cook whatever you feel like for $35 per hour.

Make smart spending decisions. Stop thinking that because you're earning more money, you should be spending more. Your future wealth depends on how much you save and invest, not on how much you spend. And if you want more ways to live a rich life for less money, you'll find them in my book, Living Rich.

Regards,

Mark Ford

Further Reading:

"Building wealth is all about being patient and staying committed," Doc Eifrig writes. "If your strategy works... no single trade will make you or break you." Read more here: The Three Principles of Consistent Wealth-Building.

Doc believes being patient and staying committed works in any market environment... "Anyone who reads a newspaper or watches financial news regularly is always going to have a reason to get out of the market," he writes. "Don't be one of them." Learn more here.

Why Mark Ford is following Warren Buffett with his Legacy Portfolio...

"Most people know Warren Buffett as a great investor," Mark Ford writes in his e-book The 11 Secrets Every Wealth Builder Must Know. "But few know that he wasn't always good at his trade."

Click here to get immediate access.

You CAN Live a Rich Life While Building Wealth

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