What’s your money’s purpose? No one ever got rich by saving money

39 thoughts on “What’s your money’s purpose? No one ever got rich by saving money”

  1. Nicely said. I think saving is essential early on in wealth building. At some crossover point, compound interest takes over and does the heavy lifting. Investing on multiple fronts will help fund early retirement and other purposes you have in your life. We like objective based investing for our different accounts.

  2. Ultimately the road to wealth is a three pronged attack, earn, invest, and save. Ultimately you need a mix of all three to get wealthy. So in some ways I agree with the statement, savings by itself doesn’t bring wealth.

    1. Yup, totally agree. Saving is just one component within the larger wealth-building strategy. Alone, saving won’t make a huge difference, but when combined with earning and investing, it absolutely makes a big difference after compound interest has an opportunity to take over.

  3. ESI would be proud, Steve. Compound interest is an amazing thing to watch. After tracking our net worth for decades, it’s rewarding to see our net worth increasing in recent years WELL beyond the additional savings we’re funneling into the pot. Burn, FIRE, burn. Compounding is the fuel. An early exit is the reward. Screw you, Corporate America (smiles).

  4. Ah snap….you mean I have to invest what I save….

    This was a good rant! Thank you….It is interesting how success begets success (at least in this market). The stocks grow, your net worth grows, and boom it grows quicker every day. They say the first million is the hardest to save, I am still trying to get to a 6 figure net worth (though my savings are in the $300K range).

    I will be trying to teach my son to invest young and often. He can have fun with his friends, but if he gets money in the market, then at 30 he won’t have to worry as much about it and can pursue a life less lived (meaning a life without daily work, etc.). Sounds like a dream to me.

    1. Ha! Yup, who knew?!? And I absolutely agree that success begets success. It’s an exponential curve, just like compound interest. The idea of building upon your previous increases is an amazing thing – and totally ER-enabling!

  5. A good reminder today. I tend to fall into the trap of saving but then letting it sit around in the checking account for too long instead of putting it to work. I’m far too conservative at times. I guess there could be worse things. Take care!

  6. Haha that office space scene. My favourite is when family guy duped it with Peter’s the bird is the word CD.

    Everyone in my family puts their money in the mattress. I grew weary of fighting with. Old school chinese people can be extremely stubborn. 10 years ago my mom had 30K in cash and today, she has 30K in cash. Sigh.

  7. Setting your investment goals and then having those amounts automatically invested (kind of like the evil auto payments, but good) is the easiest way to climb the mountain. The benefit to this is that then, you don’t need to budget. All your investments are automatically made, you merely have to live long enough for your goals to materialize, and in the mean time, you can spend away on what is left to you after your auto investments are made. None of that pesky and stingy saving stuff. Couldn’t be simpler.

  8. Yeah, I think saving money only comes into play when you’re applying those excess funds to wealth-building. Right now for us, that means applying surplus funds to debt, since any stock gains will be canceled out by the interest on our debts.

    1. Thanks Mrs. Picky Pincher. Spot on – applying surplus funds to dead is an awesome way to become debt free. And once that happens, wealth building has the tendency to skyrocket.

  9. It is important to distinguish between reducing expenditures and saving. Many people can reduce how much they spend in a given transaction by getting a good deal or accepting a lower end item. But then they just keep on spending until they are out! It sounds obvious to those of us who are reducing expenses so we can save more, but actually saving your savings is a really big step.

  10. This post struck a chord with me (wish I’d read it 10 years ago!). I’ve been in my company pension for a long time (under-contributing but rectifying!) and am actively starting to boost my stocks and shares ISA (UK tax efficient product) having left money for far too long in a cash equivalent. However, when you’re in your 40s and hoping to retire within a 15 year time span, the temptation is to take more risk than you’d ideally like to try to make up for lost time. Do you have a view on the best approach for investing with a relatively short (12 years) timeframe? Trying to reconcile the need for investing with the fear of losing money. Good post, thanks.

    1. Hi Sarah – excellent question, and I can only speak for me when I say that I’m a little more risk tolerant than the average person. Therefore, I would probably be a little more aggressive with my investments – but that said, I do NOT pick and choose stocks. I just don’t know enough about them to feel qualified to make those types of determinations.

      What I might do is talk to a local financial planner/advisor in your area and see what they think about maximizing your short term gains. My wife and I have always been long term investors, so it’s tough for me to comment on strategies for the short term. It probably includes investing in individual companies.

      Again, I don’t invest for the purpose of short term gains. But, that also doesn’t mean it can’t work.

  11. I’m definitely with you that savings alone won’t get you there. Hell, inflation alone kills the value of non-invested cash pretty quickly – at 2.5% inflation, your money’s purchasing power gets cut in half every 30 years.

  12. This is interesting food for thought, although I do think many people who are really rich are also really stingy. It’s just making the right purchases. I do think you need to have investments…..but I dislike needing to buy property to retire early. I’d rather just super lower my living expenses and live way below my means (I live on a sailboat)….and that makes the goal so much easier.

    1. Hey Kristin – I agree, a lot of wealthy people out there know exactly what they are buying. They know the value they get for the money spent. Unless you’re just absolutely filthy rich, I think these same principles definitely apply to those folks as well.

  13. Great read! Saving for the sake of saving will get you no where unless you put that money to work. This thinking is almost as bad as folks that think us aspiring early retirees are “only focused on money” when most of us only want the freedom that money can buy. Money is just a means to an end.

  14. Every now then a thought pops into my head. Every single dollar I have spent since graduating from high school has been preventing me from retiring early. Dang it. Every single dollar and item purchased.

    I also sit at times and wonder how this system where we work 40, 50, 60 or more hours a week, 5-6 days a week is still going. Smart people wouldn’t do this.

    So, we save, invest and plan to quit “before” retirement age. Will that be good enough? Probably not. It will be interesting.

    1. Interesting for sure, Wade. Of course, some spending is okay – gotta spend SOME money on ourselves. But, moderation is absolutely the key, and knowing what truly makes you happy. 🙂

  15. Great article! Gave us a bit of a wake up call.

    However, you do have to save money because it takes money to make money. The currently stock market (mutual funds) have been yielding an estimated 15% of ROI. The only thing depressing about it is, “Not having enough money or more money to invest in this current market.” So, you need to save money, so you can invest it, especially in times like this.

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