Is Saving Money Making You Less Wealthy?

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Saving money is a good thing, right?

But is saving money is actually making you less wealthy…

A concept that I wished I had understood 10 or 15 years ago. Of course, we all wish we were 10 years wiser, but that’s just a part of growing up I guess.

Now, most people will tell you that saving money is a good approach to life, building a fund up to eventually make a big life purchase.

We’ll I’m thinking, saving large amounts of money is actually quite stupid and short-sighted.

Don’t get me wrong I’m not saying you shouldn’t have an emergency fund to cover unforeseen expenses.

What I am saying is the concept of saving large amounts is flawed. Because saving inherently means you’re going to be spending that money one day.

After all, what’s the point of having money if you don’t spend it?

I used to agree with that airtight logic until I realised money can make you more money.

It’s one of the only truly passive incomes.

So here it is, don’t save your money, invest your money. Why? Because savings are ready to be spent, whereas investments make you more money (to reinvest or spend) without you lifting a finger.

I know what you’re thinking, to make decent returns out of investing, you need to be some sort of Wall Street mathematical genius.

Or an asshole…

Wrong.

Anybody can buy stocks and shares, in fact, you can easily buy an index fund which simply tracks the returns of your chosen market.

Take the FTSE All-Share-index fund which anyone can invest in (a small piece of each of the top UK companies.)

At the time of writing, if you had invested £10000 just over ten years ago in 2009, your investment would now be worth £20,710 more than double, without even lifting a finger.

Compare that to if you had kept your ‘savings’ in a bank savings account or cash ISA, your money would be worth be less than £12,000.

Quite a difference.

Here’s the kicker with your savings. At the rate of inflation, £10,000 in 2009 is the equivalent of £12,337.

Not only have you lost out on massive compound growth from investing, but you’ve also actually lost money by saving.

The rate of inflation is higher than your savings interest rate. By saving money, your wealth is decreasing. That’s batshit crazy.

Now I know compound interest is boring and that investing is risky or complicated. But, actually it is not, it’s certainly not boring when you realize you’re making money in your sleep.

“Over the long term, the stock market news will be good. If you truly understand this, it will help you to be patient, unshakeable, and ultimately rich.” Tony Robbins, Unshakeable.

What’s actually happening is you’re reducing your wealth by saving, and you’re likely to spend the money long run.

If you invest your money it will grow, stocks and shares are not that risky if you spread you risk on a low-cost index fund.

You’re profiting without lifting a finger.

Personally, I’d keep reinvesting my profits to grow exponentially until I can build a decent passive income to live on, gain that sweet financial freedom.

Or if you want can still spend your profits as they come in, that’s more fun!

I’ll leave you with one final quote from Tony Robbins:

“The real route to riches is to set aside a portion of your money and invest it, so that it compounds over many years. That’s how you become wealth while you sleep.”

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