The Importance of Saving Money
Written by soben on 4:21 PMIf you had a conversation with me a few weeks ago, I would have told you that I absolutely hate saving. I loved investing money, but I hated saving money. The logic behind my thinking was that cash, sitting in a bank account is pretty much useless. It sits there earning next to no interest, typically eroding each year because of inflation.
I have all kinds of accounts with different banks and none of them are savings accounts. I was so “allergic” to savings that I actually refused to open up savings accounts. Any savings accounts that I had were always empty. Instead, I kept checking accounts and investment accounts.
Throughout my life I’ve invested in stocks, mutual funds, real estate, options, index funds, businesses, people and most often in myself and my personal development.
Growing up I knew some friends that were always into saving money. If they could save $0.50 on a $5.00 movie ticket by cutting out a coupon out of a cereal box, they would have. I couldn’t be bothered. My thinking has always been to just increase my income and not bother with saving. To me, trying to save money in terms of day to day spending equaled a lack mentality, and saving money instead of investing it equaled ignorance.
Nobody I have ever met in my life that was a good saver ever had any real wealth. Everyone I knew who was “cheap” and always focused on saving money had a very small net worth. Yes they may have been able save a few dollars here and a few dollars there, but after 5 years all they had saved up was $10,000. I’ve had investments that have made that much in profit in a few weeks, so why would I bother being “cheap” for 5 years just to save $10,000? Not only that, but by focusing my energy on increasing my income, instead of saving I could grow my income by $10,000/year quite easily and then I could make an extra $10,000/year every single year, compared to the other person who was so focused on saving.
My thinking has always been that money in the bank is useless. It should either be invested in some form of mutual fund or stock or some kind of investment that at least outpaces inflation, or put into some kind of real estate investment, or spent on investing in my biggest asset – myself.
Does this type of logic sound familiar to anyone?
Great, because I’m here to tell you that I now completely think it’s a pile of crap.
Learning to be a great saver is the only way to build true wealth.
Let me explain why.
As I mentioned above, throughout my life I have always focused my energies on increasing my income. Learning to increase your income is a very important side of the wealth building coin. It is much easier and faster to build wealth when your income is not limited by your thinking and beliefs. For example, if you work in a career field where you earn an income making $47,000/year and you expect to be making around the same amount for the next ten years, you haven’t yet learned that your income in unlimited. You have allowed society to dictate how much you’re worth and you’ve labeled yourself as a person who’s worth $50k/year.
I’ve smashed through those kinds of barriers and even though I have no formal post secondary degrees or even a college education, I’ve had years where I’ve earned hundreds of thousands of dollars in income and I’ve had years where I’ve also made less than $10,000 for the entire year. I believe that my income is truly unlimited. The only person who limits my income, is myself.
The challenge I’ve ran into though is that even though I know how to make “good money” by most people’s standards, I’ve been absolutely horrible at saving my money. I’m always investing my money into something. In some cases that may be real estate, while in other cases it may be in personal development courses to better myself.
Until last week I saw nothing wrong with that. Now I see the fallacy in my thinking.
Learning to be a Saver
Learning to be a disciplined saver is the other side of the wealth building coin. It really makes no difference whatsoever how much money you make in life, if you’re not saving a portion of it for yourself.
There are people who make millions of dollars per year out there and who end up having to borrow money at the end of the year to pay their taxes, while others who are making a modest income are able to consistently save more and more money every year.
People who make a lot of money but who don’t know how to save are just at a higher level of “broke”. Money flows through their life, but nothing ever gets retained.
What’s worse is that there is absolutely nothing more demotivating than making more and more money every year and still being broke. It happens to everyone. We make $3,000/month and we end up spending exactly that much. We work hard to bring that up to $4,000/month and sure enough our expenses now match that level of income. Pretty soon you’re making $8,000/month and you’re in the exact same boat. We always think that another $500/month would solve all of our problems. It doesn’t.
Saving Money as a Way To Increase Your Income
I’ve been really working on my mental game lately, diving into the depths of my psyche to try to understand myself better. Let me tell you what I found. I found that my ability to earn a substantial amount of income in a short period of time has been diminishing in the last few years and I couldn’t figure out the cause of it. That is until I learned about saving money.
See, what I’ve done in my life is that I’ve worked my butt off to make a lot of money, but then instead of saving it I spent it on all kinds of things. Toys, furniture, clothing, food, real estate, investments etc. The challenge is that if I look at my bank account right now, and I compare it to my bank account 15 years ago they look exactly the same. I’m not talking about my net worth here, that has grown, what I’m talking about is the actual amount of CASH in my bank account.
How many people can relate to that? Do you have the same amount of cash in your bank account as you did when you were a teenager? Maybe you even have less?
That’s the challenge I found myself in right there. In my mind, making more money began to not matter. What’s the point of making more money when your expenses just go up by the same amount and you still feel broke at the end of each month?
I have begun studying the work of Dr. John Demartini and he makes a huge case for learning how to save your money. Of course I have read about this in almost every book on finance I have ever read like Think and Grow Rich or The Richest Man in Babylon, but I never really understood the importance of saving. I thought that saving and investing were the same thing. They’re not.
Saving is when you put aside a certain amount of cash into your bank account and grow it into a nice little cushion for yourself and never touch it unless you are in a huge emergency. Ideally you want to have at least 90 days worth of your income in that cushion account. For me, I’m probably going to save up a year’s worth of income before moving into investing my savings.
What’s crazy about saving money is that the minute you make a decision to save a portion of your income “no matter what”, all of a sudden you find your income increasing. It’s like there is a built in motivational mechanism in our brains that is triggered once that decision is made. For example, if you truly decide that starting today you will save 10% of your gross income “no matter what”, you’ll be absolutely amazed how quickly you all of a sudden begin making more money.
The reason for this is because when you decide to pay yourself first, you’re making a statement to the Universe that you are worth more. You are declaring that you are important and that you deserve to get paid FIRST on your earnings. Everything else that needs to get paid becomes secondary. That includes your mortgage, electricity, Internet, taxes, food, etc. I know that to those who don’t save their money, it may sound absolutely ludicrous to think that saving money is more important than putting food on the table or paying for your electricity bill, but I assure you it’s not.
When you declare that you are worth more, the money to pay for all of those things will manifest itself in your life.
Saving money has the effect of increasing your income. Don’t believe me? Try it for six months and see what happens.
Saving Money and the Law of Attraction
To become a master at manifesting things in your life you need to learn how to manage your emotional states. So many people I talk to about the Law of Attraction want to manifest money in their lives, but at the same time they are emotional basket-cases. They have no money in the bank, they have overdue bills, they have their landlord calling them for their rent money and they are trying to manifest millions using the Law of Attraction at the same time. Good luck with that.
It is so difficult to maintain a state of gratitude and love when your finances are a complete mess. Do you think it’s easier to resonate at a frequency of wealth and abundance when you have $25,000 in cash sitting in your bank account, or when your bank account is overdrawn by $500? You don’t need to a be a Law of Attraction guru to answer that one.
By learning how to save your income, you are automatically increasing your ability to attract and draw more money into your life. When we have a financial cushion sitting in our bank account, we resonate at a different frequency, and even more money begins flowing in.
Your ability to attract more money by having cash in the bank far outweighs any losses you may incur by not investing that money into something that earns a higher interest rate.
For example, if you have $25,000 in a liquid bank account that you can access at any time, you will resonate at a totally different frequency than if you have that same amount of money in equity in your home. Of course most people wouldn’t dare pull out the equity in their home and put it into a savings account because they’re afraid they’ll spend it – and that’s the whole point; you don’t TRUST yourself with money so why would the Universe trust you with it!
Does This Excuse Sound Familiar?
The excuse everyone typically has for not saving money is that they don’t have any money to save. They are barely making enough money to pay their bills. They fantasize about starting to save money as soon as they make more money than their bills. That will never happen. Unless you save your money first, there will never be anything left over at the end of the month.
What we make is what we spend. The good news is that what we spend also becomes what we make. That means if you set aside an extra $50/month into a savings account as a starting point for your savings plan, you will either increase your income by $50/m to compensate for that or your expenses will drop by $50/m. That’s just how things seem to always work out.
Everyone fights this logic. I used to fight it too. There is absolutely no valid excuse for not paying yourself first and saving a portion of your income. None.
Now I know some of you are thinking that if you were to save $100 at the beginning of the month, for example, that you may not have that $100 to pay your electricity bill and then your power will get disconnected and everything will fall apart. Well, here’s the thing. If you set aside $100 in the beginning of the month, and then you live that month and at the end of the month you haven’t made any extra money, and your expenses haven’t gone down at all, and you absolutely positively need to pay that electricity bill for $100, then just take it out of your savings and pay it! You haven’t lost anything. Next month try again.
There is absolutely no valid reason not to set aside a certain amount of income at the beginning of the month into your savings account. Worst cast scenario you end up pulling that money out to pay a bill because your income did not increase and your expenses didn’t drop like I said they probably will.
What if I’m right though? What if you save $100 and at the end of the month somehow you have enough money to cover everything? How awesome would that be? There’s nothing to lose in trying.
What if you put aside $100, and then at the end of the month you do notice that your income went up a bit and your expenses dropped, but you’re still short $50 for that electricity bill? Well then pull out $50 and pay it, but keep the other $50 in the savings account and try again the next month.
What have you got to lose?
Saving Money and Building Wealth
Like I said, learning to be a saver is the other side of the wealth building coin. There are many different systems of building wealth out there taught by many financial guru’s, but they all start with the same thing – saving a portion of your income.
Most guru’s will tell you that you should set aside at least 10% of your gross income into savings and grow it from there. What do you do from there? Nothing. Keep setting side 10% of your income into a cash account, or some totally liquid account that earns a little bit of interest, but that doesn’t ever lose any of it’s value. Keep saving and saving and saving until you have at least 90 days worth of your income in cash set aside as a cushion.
What do you do from there? Then you’ve earned the right to start investing into something a little bit less conservative. There is a whole system of growing your money from there, but it’s beyond the scope of this post. I wouldn’t worry about it too much until you’ve at least gotten to the point where you have your money saved.
My Experience So Far
I just started following this plan this week. So far I have seen a huge shift in my way of being. Even though I’ve just started to put aside a small amount per month, I’m all of a sudden feeling the urge to go out and earn more money because I want to grow my savings account. I’ve also seen a huge increase in my income that happened right after I made the decision to save a portion of my income no matter what.
What’s more amazing than that is that all of sudden I’m starting to see that all the great wealth builders out there that have built and kept their wealth are great savers. My previous beliefs were filtering that out before, but now I see that learning to be a great saver is a huge part of building wealth.
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