TSI #26: Saving money won’t make you rich
Dec 19, 2022Today I want to focus on the saving side of personal finance. If you’re reading this, you’re probably familiar with how building wealth works. Earn more, spend less and invest the difference.
Naturally, this leads some people to believe that you have to be extremely cheap. Counting every penny might help you reach your goals faster after all.
But is it really the best trade? Will you really allow your life to pass you by just to retire a year earlier?
Let me share a few places where you should be cheap and a few places where you shouldn’t be.
Where to be cheap
Spending your money on something that doesn’t make you happy is a terrible waste. Not only are you not having fun, you’re also wasting money that could be invested.
Nevertheless, many people are consistently buying things they don’t need.
How many people buy cars they can’t afford just to be “cool”?
How many families buy houses that are too expensive just to impress the neighbor?
How many individuals have four streaming memberships they never use?
These are just a few examples. Please take a minute and think of how much money you waste every month on things that add no value to you. That’s where you need to be cheap.
Where to not be cheap
Let me ask you something. What is life?
Your answer might be different. But, I see mine as a collection of experiences. That’s why I love spending money to make memories. That’s something no one can take away from you.
Perhaps cooking is something that fulfills you. Why not treat yourself and buy that pan you have always wanted.
Love sleeping? Buy that quality mattress that will allow you to recharge.
You should not be cheap on things that matter to you.
Although, there is a thin line between treating yourself and overindulging.
I believe the following example is perfect to help you understand this concept.
Frugality explained
Have you ever bought a $10 shirt just because it was cheap and then wore it once? Your cost per wear would be $10 in that example.
What if you actually bought a $100 shirt that you really liked and wore it a hundred times? Your cost per wear would be $1.
It might seem strange. But the latter scenario is actually much smarter. Although it might seem like overspending at first.
If you’re the type of person to choose option two, I have to congratulate you. You’re a frugal person.
I’m guessing you also know where each dollar you make goes. That will allow you to enjoy your life and build wealth at the same time.
Sometimes it makes sense to treat yourself with things that make you happy. As long as your long-term investing strategy is not neglected of course.
So, note down these points and start investing today:
- Be cheap on things that add no value to you
- Invest your money in things that make you happy
- Don’t forget about your investing strategy
