Why I Stopped Spending Money

What's up guys? It's Graham here. So, I think it's no surprise that for anyone to see my channel for a while, I’m pretty frugal. To be honest, even calling it that could be generous. I'm, uh, extremely thrifty, or maybe we could just call it fiscally conservative; that has a good ring to it. Anyway, whatever you want to call it, for my entire life, I've avoided spending money, and my default has always been excessively safe. Throughout my entire 20s, regardless of how much money I made, I kept my basic expenses at fifteen hundred dollars a month. I saved 99% of my income by only living off the extra cash flow my rental properties generated, and no matter what, I still wouldn't spend the extra one dollar to get avocado at Chipotle because it's a waste of money.

Even now, I earn enough to reasonably do almost anything, but besides the occasional DoorDash dinner or fish to add to the aquarium, I don't spend money on anything that doesn't at least hold its value or pay for itself. Oddly enough, the more wealthy people I've spent time with, the more I've begun to realize that almost all of them do this. According to actual research and studies across tens of thousands of millionaires, there's an easy-to-follow blueprint to building wealth that almost all of them do, that starts with something that you already have. If you watch this video, you'll see exactly how adopting a few of these fiscally prudent practices could benefit you in the long run, especially if one day you want to live off your investments. And make enough to smash the like button for the YouTube algorithm.

Alright, so to get to the bottom of this and partially explain why I'm so cheap, we have to discuss the psychology of becoming wealthy, and all of that begins with the Fidelity Millionaire Outlook Survey, which analyzed the investing attitudes and behaviors of more than a thousand millionaire households. Now, as I read through this, one point stood out in particular: from all the millionaires surveyed, 86% of them were self-made. And even more remarkable was that 78% of them started out as middle class or poor. It's from this data that we could break down the five reasons why wealthy people are often also the cheapest and why I prefer not to spend money unless I absolutely have to.

First, by looking at the research, it becomes apparent that most people didn't get rich by wasting money. Many people fail to realize is that the personality trait of someone who diligently saves and invests doesn't magically change the moment they become wealthy. It's often that these frugal characteristics made them rich in the first place, so continuing that mindset is what actually allows them to keep that money.

Second, speaking of keeping money, for most millionaires, every little bit counts. Like, take a guess at who you think would be most likely to use a coupon. If you guessed people making over a hundred thousand dollars a year, you would be correct. That's right; a survey found that people earning over a hundred thousand dollars a year were twice as likely to use a coupon than those earning under thirty-five thousand dollars. On top of that, another survey for Millionaire’s Corner found that one in three people with a net worth of about five million dollars shop at Walmart. Not to mention, fifty percent of those high-net-worth individuals shop at Costco, and 25% of them shop at Target.

Third, studies have shown that a person's spending habits are largely dependent on how quickly and easily they obtain their money. Generally, it's found that the faster you make your money, the quicker you tend to spend it. For example, the National Endowment of Financial Education found that up to 70% of people who receive a large amount of money up front blow it within a few years. Even more shocking, but 78% of professional athletes in the NFL are either bankrupt or in financial stress within just two years of retiring, and sixty percent of NBA players file for bankruptcy within five years of retiring. The thing is, people who receive large windfalls have a hard time conceptualizing just how much money that actually is or how long it'll last them because they've had no prior experience dealing with that type of wealth.

Fourth, when it comes to that, most millionaires understand that their wealth is not permanent, and so they're more likely to save. According to an Affluence and Wealth Survey, they found that 81% of respondents were concerned about unquantified risk that led to an overabundance of saving, knowing that their wealth could be short-lived. In fact, here's another thing to consider: if you're in the United States, you have an 11% chance of making it to the top one percent of earners for at least one year. However, do you want to know what your chances are of staying there for at least five years? One in 45. And your chance of staying there for at least ten years is one in a hundred. That's right; only 1% of the one percent will actually be in the one percent for more than ten years. The reality is that wealth and money could very much be fleeting, and most self-made millionaires recognize this and plan for a time where they're not going to be making the money that they are today.

Finally, fifth, flat-out saving money becomes a very hard habit to break. Like the studies have shown, the majority of rich people became rich through decades of frugal living and saving; those types of habits are not easily broken. That's why you'll see someone worth millions of dollars still dispute a 10-dollar overcharge on their account or try to negotiate a small bill. However, for myself, I've taken a slightly different approach, and this is what I believe.

Alright, now in terms of myself, most of my fiscally efficient psychology began in high school when I started working a part-time job and began to understand the true value of money and just how hard it was to keep, if that makes sense. For example, go and buy some groceries: a hundred dollars - gone. Car insurance: a hundred and fifty dollars - gone. Cell phones: sixty dollars - gone. A new pair of shoes: a hundred - gone. Dinner: forty dollars - gone. And when I was 16 years old, I would literally think to myself, if I'm making twenty dollars an hour, that dinner is going to cost me two hours of my time to pay for it. How do people do this?

When I got my real estate license at 18 years old, I would drive 45 minutes every single morning to Beverly Hills because I knew I wanted to sell real estate in the most expensive area that I could. And all of a sudden, that affluent lifestyle became somewhat normal. It kind of reminded me of The Wizard of Oz when you got to see what's behind the curtain. I was a kid who didn't come from any of that, and seeing a person buy a home with five million dollars in cash was mind-blowing. Just seeing that people like this were out there and existed, and seeing that there weren't anything special—they didn't have any crazy talents or work any harder than you and I—they were just normal people who happened to make a lot of money, and to them, it wasn't anything special. It just inspired me to think that if they could do it, then I had the chance to be able to do it as well.

And hey, you know what? Look at me now! I'm in a converted garage talking to a camera; life is great. Subscribe! But now for real, I still have the same mentality and psychology about money as I did back when I was 16 years old, where every penny counts and every dollar matters. Some of it I acknowledge is completely illogical when I'll spend more time trying to figure out why the electric bill was ten dollars higher this month than the prior month. But for the most part, I maintain the philosophy that I'll only spend the money that my investments make me, and that's it.

This started as two thousand dollars a month in 2012 from rental properties that I had bought after four years of working as a real estate agent, and today it encompasses rental income, dividend income, capital gains, and income from the projects I'm involved in. Each year, this earns a little bit more than the last, and this allows me to slowly increase my lifestyle in a way that's sustainable, regardless of how much money I make. This is at the core of the teachings of the financial independence, retire early community. It really doesn't matter how much money you make; instead, the number to focus on is how much that money will make you indefinitely if you invest it. And that is how much could sustainably be spent.

For example, if someone is able to save, even invest, twenty thousand dollars a year, that shouldn't be seen as twenty thousand dollars; instead, that's an extra eight hundred dollars a year that could be spent indefinitely from investing that money. And that is my philosophy throughout pretty much everything. I purposely keep my day-to-day expenses below what my investments make. That way, it'll never run out. I could reinvest the difference to continue growing it, and if something happens, the market doesn't recover, I have plenty of room for error.

Now, of course, there are some items that I'll spend money on, like a specialized car or a watch, but I look at every single one of those items in terms of its net cost, and oftentimes they actually wind up making money. Certain cars, for example, could be purchased in such a way where you could sell it for the exact same price you paid for it, and watches could often make a fantastic investment that you get to wear for free. Beyond that, though, there is one area that's changed substantially throughout the last two years, and that's the concept of being able to buy back my time.

I guess as I've gotten older and busier, I've realized that there's only so much I could reasonably do in a day, and as a result, I've begun to outsource the tasks that allow me more time to focus on the higher yielding ventures. For example, I've hired a cleaning crew to come once a month to clean the house. I'll order DoorDash the nights that I know I will be working late. I paid extra to board early on Southwest flights so I could spend more time making thumbnails. I've also hired a full-time editor. Alex, are you really making me edit a video of myself? Yes, along with help on the Iced Coffee Hour podcast to make sure everything is running as smoothly as possible, even though these were all things that I used to do myself. Taking a step back has allowed me to see the bigger picture and make more money the more money I end up spending.

Here's the thing: at the end of the day, money is really just about giving you options. It's the option to pursue what you enjoy the most. It's the option to outsource the tasks you no longer enjoy. It's about the option to focus your time on what means the most for you. If that's going and spending five thousand dollars on a Gucci bag, then you know, so be it. But from my experience, the real enjoyment doesn't come from buying things, but instead, it's having the option to buy those things if you wanted to.

And I think you'll find that once you could reasonably afford almost anything you want, the desire to own those things just magically goes away. I guess the main takeaway here is that money's main purpose is to provide security and allow you to pursue the options that you feel are best. It's also just as equally important that when you do make money, be smart with it. Don't sit there earning twenty thousand dollars a month from the Anchor Protocol thinking it's going to last forever. Don't expect that you've hit a lucky break with your social media marketing agency and expect those clients to stick with you for the next 40 years. Realistically, it just doesn't happen without a considerable amount of ongoing work on your end. Things happen; things change. And it's so important to save while you can, invest while you can, and really value your money to get it to work for you.

That's why wealthy people are very often the type to prioritize saving, and that is also why I am very fiscally efficient. Or, you know what? Maybe I'm just cheap. So, with that said, you guys, thank you so much for watching, and until next time.