Save Money - Get Rich!

Save money, and you'll get wealthy! It is almost as simple at that. If you learn how to save money on a regular basis, it's all you need to get rich slow. And you need it also for the fast lane: especially at the beginning of your million dollar journey, your savings are the fuel to power your rocket. They are the source of the funds you will invest, and investments are what will make your trip much faster.

Save Money!

The more you can save on a regular basis, the more you can invest, and the quicker you can get to your first million dollar milestone. Yet, even without the boost that comes from investments, if you save money a bit more ambitiously than most, you can become a millionaire. If you make $3,000 a month at the age of 25 and are able to save 20% of it, and assuming your interest rate only covers the typical annual inflation (3%) and your salary increases at the pace of the inflation (3% p.a.), you will become a millionaire by the time you turn 67. Obviously, if you can get a higher rate of return for your savings, or if you can save more for example in your forties and fifties, you'll reach your million much quicker.

Compound interest is the reason why you should start saving as early as you can. By compounding relatively small amounts over a very long time you achieve much more than with big amounts over a relatively short period. This is why many people realize only in their fifties and they sort of missed the boat: being so busy buying nice things and trying to keep up with the Joneses, they missed a unique opportunity to accumulate wealth that would have soon gotten them much ahead of the Joneses!

When you save money, you borrow from today in order to get greater benefits tomorrow. Obviously, this is not easy for many of us, and it really goes against the grain of the demand for instant gratification by the majority of people today. Then again, if it were easy, everyone would be doing it. To be fair though, it isn't that hard - it's just a matter of learning the habit and sticking to it. It does require, though, that you are prepared to live below your means, and thus act a bit poorer than you could. This is probably what gets most people - they just find it so hard not to use all your income and maybe even borrow a bit on top, as "everyone else" seems to be getting nice things - houses, cars, nice furniture, expensive accessories, trips abroad, and so on.

See to the Future!

For me, the motivation to save money comes from understanding and being able to quantify the rewards. By making a few simple calculations, you can really get a really concrete idea of what levels of wealth you can achieve and how quickly, under various conditions. For most people, myself included, it's hard to give up something today if you don't have a clear idea of the rewards that you'll reap later. It's a lot easier, though, if you do have a concrete sense of the reward that will come later and if you can visualize how your efforts can make you happier later. This is why I recommend everyone to spend a moment to quantify how much you can save right now on a regular basis, whether it's 10%, 15% or maybe even 20% of your income, how that might change - increase, I hope - over time, and what those savings will do to your wealth - using a modest 3-4% interest rate - over 5, 10, 20, or 40 years. Then you should do the same with a bit higher rates of return, reflecting your intentions and opportunities to make higher-yielding long term investments. You may be surprised how wealthy you could actually get - so then it's just a matter of getting set and starting to do it!

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