A CFP shares how his millionaire clients spend, save and invest their money

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When it comes to managing your money, it's natural to have a lot of questions: Are there expenses you shouldn't put on a credit card? How much cash should you keep in your savings and checking accounts? When are you ready to start investing?

But personal finance is personal, and sometimes the answers to these questions aren't straightforward. What works for one person won't work for another. And it can sometimes seem like certain financial decisions are only reserved for the very rich.

Yet, we can also learn a lot from how wealthy people manage their money — and apply some of their good habits to our own lives.

Select spoke with Faron Daugs, certified financial planner, founder and CEO at Harrison Wallace Financial Group, about the smart financial moves he sees his millionaire clients making.

Daugs has more than 30 years of experience, and he's seen his clients go through various economic events that impacted their money over the decades. But no matter what was going on with the economy or the markets, they stayed disciplined when it came to spending, saving and investing their money.

Here are five money habits of Daugs' wealthiest clients that anyone can apply to their own finances.

If you have more disposable income, it's easier not to overspend. Yet, it's worth noting that even millionaires, including some of Daugs' clients, still have frugal spending habits.

While these clients do enjoy some of life's finer things, Daugs says they typically do not overspend.

For example, they'll purchase a certified pre-owned car versus buying a brand new one; they will search for good deals on vacations; they may upgrade to economy plus on an airline but won't pay for first class; they will keep their cell phones as long as they are working and don't feel the need to upgrade every time new technology comes out.

Daugs' clients use credit cards that offer rewards for their spending. Many of them will put most of their day-to-day living expenses on a credit card that offers points or miles in return. Then they use these rewards to offset the cost of vacations or leisure activities.

And they always make sure to pay their credit card balance off in full every month to avoid incurring any interest charges or fees.

Another added benefit of using a credit card for most of their everyday expenses is that Daugs' clients have a strong understanding of what it costs them each month to live their lifestyle. "This then proves to be extremely helpful information when helping them plan for their retirement goal and retirement expenses," he adds.

The habit of paying yourself first — also known as reverse budgeting — means you build a budget based on your savings goals rather than based on your spending and expenses. In doing so, you ensure that every month, money gets allocated to future you.

Daugs' clients pay themselves first by systematically saving money via direct deposit from their paychecks, or as a recurring transfer from their checking accounts.

"Whether it be into their employer retirement plans, IRAs or general investment accounts, this is money they put away and invest with no intention of using it for day-to-day living," Daugs says.

By saving first, Daugs' clients are able to freely spend whatever is leftover, with the comfort of knowing their savings plans — both long- and short-term — are already taken care of.

"They live within these 'net cash flow' means and make every effort to keep all savings plans active and increase them on an annual basis," Daugs says. "They do not dip into these investments for anything other than their intended goal."

An emergency fund is essentially a stockpile of cash that you can use in the short term for unexpected expenses.

Financial experts generally suggest setting aside three to six months' worth of your living expenses in an emergency fund (Daugs' clients typically maintain six to nine months). But just how much you choose to save is dependent on your individual income and comfort level.

Arguably as important as how much you save is where you save. Your emergency fund cash should be kept in a savings account that's accessible and not at risk to the ups and downs of the stock market, but at the same time it should always be earning the highest return possible.

"In today's low interest rate environment, it can be challenging to find reasonable return for these emergency funds in traditional savings accounts," Daugs says. For this reason, Daugs recommends his clients follow a more productive "tiered" strategy when deciding where to put their savings:

1. Tier one: In a simple money market or high-yield savings account.
2. Tier two: In an ETF portfolio that invests in short-term maturity securities. "While these can fluctuate in value, they typically generate higher yield than savings accounts and the short-term maturity keeps potential fluctuation in [value per share] at a minimum," Daugs adds.
3. Tier three: In Buffered ETF investments. Since it is unlikely that Daugs' millionaire clients will actually need their reserve dollars quickly, they utilize these Buffered investments that allow for potentially higher returns tied to a market index, such as the S&P 500 or the Nasdaq, yet offer some degree of downside risk protection, aka a "buffer."

Most of Daugs' clients try not to carry debt on things like cars or boats to avoid paying years of interest on something that quickly depreciates in value.

However, they may carry a mortgage on their primary home. "This is especially true in this current low interest rate environment," Daugs says.

He adds that still even now, most of these clients accelerate their mortgage payments to pay it off years ahead of schedule and thus reduce the overall interest they have to pay.

Of course, millionaires come to the table with more disposable income and resources than the average American. It's easier to save when you don't live paycheck-to-paycheck. That said, these five financial habits are straightforward and can be good guidelines that anyone can follow.

No matter where you are on your own financial journey, establishing smart money habits early on can help as you navigate how you want to spend, save and invest your cash.

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