If ever I feel discouraged about my money – that I won’t have enough to retire one day, buy a house, or take the vacations I want – I remember one thing: You don’t have to start rich to become rich.
I learned that important lesson from the dozens of people we’ve profiled on Business Insider, from early retirees to real-estate investors to teachers turned travelers, many of whom saved their way to million-dollar net worths while earning an average salary.
We’ve rounded up the best pieces of advice from these super-savers so you can begin to implement their successful strategies for building wealth.
Think about every purchase in terms of cost per hour
Saving 70% of your income is an impressive feat. It’s doubly impressive when you’re living in New York, the second-most expensive city in the world. But that’s exactly what one woman did to be able to quit her job at 28 with $2 million in the bank.
Though JP Livingston was earning six figures in her finance job, she lived modestly in a three-floor walk-up, staying there even when her salary increased.
Ultimately though, her No. 1 piece of advice for saving money comes down to a shift in mindset: Don’t take prices at face value, but consider them in the context of how many hours of work it would cost – a strategy she picked up from Vicki Robin and Joe Dominguez’s book, “Your Money or Your Life.”
“If you think about how much you earn and you divide it by the number of hours you work, you get the amount of money per life unit,” Livingston told Business Insider.
Let’s say your cost per hour comes out to $20. That means a new $700 iPhone would shake out to 35 hours’ worth of work. A $100 night out would be five hours’ worth. A $40 blouse would run you two hours’ worth. Ask yourself: Is the purchase worth it?
“If I were to get one point across, it’s that if you think of things as not just what you save that day, but having that money work for you and compound, it will totally change the way you spend money,” she said.
Don’t deprive yourself
Brandon, a software developer and the blogger behind the Mad Fientist – who doesn’t use his last name online for privacy reasons – retired last year at 34. He’d spent several years living in rural Vermont, saving and investing 70% of his after-tax income.
Though Brandon kept a meticulous spreadsheet to track his spending, investments, and net worth, he stresses that anyone striving for early retirement should avoid becoming so obsessed with it that they isolate themselves.
“I went so hardcore that I made myself really unhappy during the process,” he said during an episode of his “Financial Independence Podcast.”
“I just didn’t want to do anything that involved spending money,” he said. “I just wanted to get there as soon as possible.
“Focus on the power that you’re getting along the way with all that money that you’re saving up, and use that power to make your life a lot better along the way,” he added. “Don’t sacrifice happiness for that final number in the bank.”
- Joe and Ali Olson
Live frugally and find a good side hustle
Joe and Ali Olson spend their days traveling around the world with their 1-year-old daughter, Annabelle.
Each in their early 30s, Joe and Ali quit their jobs as public school teachers with $1 million in the bank in August 2015, retiring after just eight years in the workforce. The couple credits their fortune to living frugally and finding a good side hustle.
Around 2007, after purchasing their Las Vegas home for a steep discount, they started buying up rental properties. They lost money at first, but the market eventually flipped, and they began to turn a profit. By the time they quit their jobs, they owned 15 properties.
But even as their net worth rose, they didn’t succumb to lifestyle inflation. The pair continued to save 75% of their income and resided in their 400-square-foot home. Joe told the Mad Fientist that they “enjoyed simplicity” and managed to live on about $20,000 a year without any major sacrifices.
“We cultivated a concept of gratitude about everything,” Ali said. “And once you’re grateful for everything you have, to try to get more seems silly.”
- Dan Kitwood/Getty Images
Max out your 401(k)
Sean earns $70,000 as a financial analyst and saves about 65% of his take-home pay to invest in the stock market, mainly through a Roth IRA and low-cost exchange-traded funds.
But his primary investment goal is maxing out his 401(k) every year, he told Business Insider.
“Not only are employer matches possibly the greatest investment ever, the tax advantages of taking it a step further and contributing the IRS-allowed $18,000 maximum each year are just too amazing to ignore,” he said.
By contributing the maximum to his 401(k), Sean said he’s saving more than $5,000 each year in taxes. He calls it “the smartest investment I ever made.”
“The rate which my net worth started growing, now that the full power of tax advantages were behind it, still blows my mind,” he said. “Plus, I’m saving money today by giving myself more money in the future.”
In March, his 401(k) balance topped $54,000.
- Courtesy of Kristy Shen
Log your monthly savings activity
Kristy Shen says she and her husband, Bryce, were able to bank $1 million by age 31 and quit their jobs as computer engineers in Canada to travel the world, thanks to a diligent habit of tracking their money.
“I think tracking is absolutely paramount,” Shen told Farnoosh Torabi, the host of the “So Money” podcast. “That’s one of the things that would help people a lot financially.”
The couple, now both 34, not only tracked their spending to lay out a practical path to a million-dollar net worth, she told Business Insider. They also tracked their savings activity, recording all significant – and unexpected – hits or bumps to their savings to predict its effect on their long-term financial plan.
“Even if you blow the budget once or twice, it’s not a big deal. Everybody makes mistakes. I made mistakes, too,” Shen said. “Being able to track it allows you to see: ‘Hey, look! I’m going in the wrong direction. It’s not going towards my financial goal.’ So then you just move back toward the right path, and then you’re good to go.”
- Courtesy of Chad Carson
Maximize your earnings
Chad Carson, a 37-year-old who lives off passive income from managing 90 rental properties, discovered early on that the key to building wealth is maximizing your earnings.
He graduated college in 2003 with just $1,000 in the bank. After spending the next year scouting properties for seasoned investors to buy and flip and living with a friend on the cheap, Carson saved up enough cash to buy his own property. He lived in one room and rented out the other rooms to cover the mortgage and then some – a strategy he calls “house-hacking.”
“Particularly in your first 10 years, if you make mistakes of buying emotionally on your residence as opposed to buying in a very calculated manner by making your residence a house-hack or a live-and-flip, or just renting and investing that somewhere else, the magnitude of that mistake is huge 20 to 30 years from now,” he told the Mad Fientist.
With his housing costs covered and money coming in from his renters, Carson used his earnings to build a nest egg and buy more rental properties in and around his hometown of Clemson, South Carolina. He now spends just three to five hours a week managing his rentals from Ecuador, where he’s living for a year with his wife and two young daughters.
- Mr. Money Mustache
Embrace the challenge
In 2005, Peter Adeney – better known as Mr. Money Mustache – retired at 30.
Leading up to retirement, Adeney and his wife, Simi, both software engineers, stashed two-thirds of their combined $134,000 take-home pay in savings. After just 10 years in the workforce, the couple had accrued about $600,000 in investments and paid off a house worth $200,000, Adeney told Nick Paumgarten of The New Yorker, giving them a solid cushion to retire on.
But the road to banking a fortune wasn’t easy. In fact, it was full of challenges.
“What it boils down to is enjoying hardship and practicing voluntary hardship every day,” he told the Mad Fientist. “We’re trained in this country to avoid difficult stuff. And so that’s the first thing I think you got to get rid of if you want to get anywhere that’s different from the other people.”
He suggests learning to live on less – cutting down your wardrobe, buying used cars – and finding ways to add meaning to life that don’t rely on material possessions. One personal challenge he took on was learning carpentry.
“Even if you’re still at the very beginning of getting your finances in order, having this as a framework suddenly makes everything else work better,” he said. “Suddenly, you can earn more money and you can spend less money because you engage in this quest to make your life better, which happens to involve doing difficult stuff.”
- Justin/Root of Good
In 2004, Justin McCurry landed his first job out of law school, working at an engineering consulting firm for $48,000 a year. Frugal by nature, he and his wife began saving diligently and maxing out their retirement accounts each year.
Justin’s salary topped out at $69,000, and wife’s reached as high as $74,000. But by 2013, the couple had saved up over $1 million – enough for Justin to retire at 33. Their net worth is still growing thanks to investment returns and now sits at $1.7 million.
Justin told the Mad Fientist that he relied on one foolproof strategy to get to where he is today: saving early and often.
When you’re still young, how you save doesn’t matter as long as you’re actively putting away money one way or another, McCurry says.
“Figure out how to invest it as you go along,” he said. “The planning aspects of it, how much you need to save, your budget, your withdrawal rates, and all that – that’s a lot easier to figure out later in the game.”
Time is one advantage you can never get back if you’re planning to retire early, so don’t worry about knowing all of the ins and outs of taxes and investments from the start. “Start saving today, and then get smarter tax planning as you learn more, as you get along,” McCurry said.
Emmie Martin contributed reporting.