Savings Will Not Take You There, But Get You Started.

savings, financial literacy, personal finance, inflation
Almost all financial experts will start their financial advice by encouraging you to start saving part of your income rather than spending it all; an advice that is getting people into more financial mess in many different ways. The reason is simply because; the problem is not in saving money but what to do with it when you save it all, If you are saving money to spend later, then why stressing yourself. I am not disputing you need to set some cash away for emergency, but is that your ultimate financial goal. Moreover, do you know that you might be losing money by savings? Before I start discussing that, let me join others to encourage you to cultivate saving culture because it is truly the starting point towards creating a lasting wealth.

Financial Freedom Start with Savings

A worthwhile achievement requires a hard-work and most especially a discipline. Even those who believe love of money is the root of all evil recognize being financially free as achievement. So, if you care to be financially free, you need lot of discipline and that start with savings. Being exceptional is a prerequisite to win competition which means you stand out among the crowd. When it comes to the game of financial freedom, the discipline of delaying the pleasure of spending is that exceptional trait that is requires.

I know how hard it could be for people to save, most especially, if you barely earn enough for your necessities. But believe me, there is no amount of excuses you will put forward that will be enough because I have been there before. Instead of strongly believe you can’t afford to save, why not change that to a question asking “how can I afford it”. According to Robert Kiyosaki, the author of Rich Dad Poor Dad

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“One lets you off the hook, and the other forces you to think. By automatically saying the words ‘I can’t afford it,’ your brain stops working. By asking the question ‘How can I afford it?’ your brain is put to work.”

Meanwhile, your thought and words are important tools towards achieving your dreams, so you have to learn using it positively. Saying “I can’t afford it” creates negative feelings like sadness and helplessness. When you change that into a question, however, it creates possibility and that allows positive feelings like excitement. Everything that you want is now a call to action, not an unattainable goal. Essentially, it’s the basis for a total shift in thought. If you regard your current financial state as temporary, and start thinking of ways you can alter your current methods and afford the things you’re after. You will design a plan that will get you started.

You either discipline yourself to save from the little while you look forward for increase in income or put forward a plan to increase your income and save a big chunk of the increment.

To make it easier for you, I advice;

  • You plan a predetermined percentage of your income for savings; 10%, 20% or more.
  • Make it the first never the last. Don’t spend and save the remaining, save, then spend the remaining.
  • If possible, automate it. Make it deductible before you receive it.
  • Have a target, make it impossible to withdraw.
  • Have a plan of what to do with it towards improving your financial condition. Invest it; buy assets not liabilities.

Different Approach to Saving Money

There are many approaches to savings that is better than piggybank and putting money in your bank account. You earn rather than loose money by using some of them.

  • Ploughing Back Profit: I am not a fan of generality. The savings approach above is not applicable to everyone even to me when I started. The reason is because I don’t earn a monthly paycheck and I am looking for money to develop my business. Then, why should I keep stacking money in my savings account in whichever form when I could use such to buy materials, goods, tools or machinery. That is one approach if your case is similar. It is called ploughing back profit. If you follow that approach, I guaranteed you will be saving more than you spend.
  • Savings or Investment Club: When you see people of like minds, you can join or bring them together to start either of the two. As for savings club, you have the opportunity for target and lump-some to invest or buy assets and more better if you are fortunate to be among the early receiver. But instead of going for savings club, I rather go for investment club where our main goal is to work together with regular contributions to become financially free. With investment club, your money starts working immediately, the discipline of not spending your contribution and in addition opportunity to learn how to invest.
  • Capital Market Account: Apart from the initial minimum fund requires to open an account with your stockbroker. You can decide to put your savings directly in stock investment if your monthly savings worth it.
  • Mortgage and Loan: Purchasing an investment property on mortgage while you repay from your earnings is a good savings discipline and in some cases, the property might earn enough for the monthly repayment and appreciate in value. It could even be that you get a loan to purchase other money making assets or start a part-time business.

Although many of these approaches have their pros and cons, all you need is to do the due diligence and learn what it takes to excel with the one you choose.

Savers are Losers

If your approach to savings is to put money in your piggybank or bank account, you are losing money. I remember when I am still naive after my secondary education with all those theories we learnt, I advice my mother to open bank account most especially focusing on the interest. We regretted it and eventually close the account.

Robert Kiyosaki said “If you want to be wealthy and financially secure, working hard and saving money will not get you there.”

Even if the reason you are saving money in bank is not interest you will receive, you will be loosing money through;

Taxes: You pay more in taxes and charges when you save. You pay taxes when you earn, save, spent or withdarw. You even pay for security of your money.

Inflation: Inflation is higher than interest on your savings. $1,000 in savings today worthless in the future, then, why save.

Robert Kiyosaki also quotes a study by Ohio State University that support his assertion that “smart people don’t”.  They don’t save because, some earn and spend it all while few know that keeping there money stagnant rather than putting it to work is not a wise idea.

Which one do you belong to, the former or later?

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