It’s generally a fascinating story when a person’s financial situation goes through a dramatic change. So what happens when a struggling young entrepreneur suddenly strikes it rich?
Do they go hell for leather and lash out on fancy cars, jetskis and holiday homes? Or, like famously thrifty billionaire Warren Buffett, do the habits that made them successful in the first place prove hard to shake?
Tech entrepreneur Fred Schebesta, 33, now runs successful comparison website Finder.com.au, but before that, at just 26, he had the biggest payday of his life when he and his business partner sold their first start-up, Freestyle Media, for $1.36 million in 2007.
Mr Schebesta’s family have now found wealth, but growing up without money was tight, setting the foundations for frugality and an entrepreneurial streak.
“It gave me the impetus to always save and prepare because I remember the tension and stress it caused when we had no money,” he said.
Likewise, when Mr Schebesta and Frank Restuccia started Freestyle Media, cash flow was “terrible”, so they took the mantra “do everything you can to save” literally.
They rented together, sub-letting spare rooms, bought household items in bulk, wore shirts till they fell of their necks, and ate cheap meals, like tinned spaghetti, “almost every night”.
It also meant personal sacrifice. He often skipped breakfast, and despite the demands of a start-up, they never drank coffee: “There was no chance we could afford that.”
Then the money started rolling in and Mr Schebesta has “slightly upgraded” his lifestyle after his company Finder.com.au turned a profit in 2010 and after the sale of Freestyle Media the year before.
Here’s his tips on how to save, and what to splurge on.
A millionaire’s tips on when to save
1. Furniture: I don’t have a single new item in my house. I purchased it all on Gumtree or bargained with people directly. I think there has been enough furniture produced in the world and we should trade it between ourselves because there is so much value still to be claimed.
2. Pay TV/Foxtel: I don’t see the point in paying for entertainment content with advertisements in it. You are essentially paying to watch ads most of the time – that just doesn’t make sense to me.
3. Mobile phone plans: I never buy a phone on a plan. I don’t see any point in paying the extra fees and I think mobile phones last longer than two years these days.
4. Bank fees of any kind: I always ensure to not pay ATM fees, monthly account keeping fees and interest of any kind. More people need to take advantage of the offers available from the banks and stop wasting money on fees.
5. Check your statements: By reading over them once a month, you will usually find something odd that didn’t actually make sense or was fraudulent, and you’ll be entitled to a refund.
6. Coupon: I love a coupon code for anything I am buying online.
7. Booze and food: I like to drink alcohol at home as opposed to paying bar prices. Likewise, share meals with people and buy in bulk.
8. Gym: You will never find me paying to go to a gym. There is an entire gym outside your door – just run on the street and use your body weight or public gym equipment.
9. Fuel: Buy on a weekday when it’s at its cheapest.
10. Walk: Try to always walk to your destination. It’s free exercise and you will feel amazing when you arrive
When to splurge
1. Indulgence: I like to get my hair cut at home by a mobile hairdresser.
2. Shopping/Travel: I only do two big shops for clothes per year. I love to buy my clothes from London because they have the best styles in the world for my body shape and shopping in Australia is drastically overpriced for what you get and has such a smaller range compared to overseas. There are two shops in Australia I will buy from and I don’t even look at the prices. I just buy what I want because I will wear the clothes for several years.
3. Good food: I also enjoy a good yum cha meal on a Sunday from time to time and order until I can’t eat anymore.
4. Health: I buy a lot of organic and fresh smoothies that are very overpriced but I know they are doing me a world of good.
Read the full version of this article by Larissa Ham at Hey Little Spender.