Recently, George posted a series of articles on why saving money can actually lose you money.
I think they were brilliantly done, but I wanted to offer my own views on savings.
As his posts pointed out, saving can be restrictive, especially if it’s based on fear, like Depression-era folks who buried their nickles and dimes in backyards and tucked them under attic roofs. (And they’re probably still there doing no one any good and not earning interest. In this case, just like George said, these small investments are losing money.)
That doesn’t mean that smart saving–and spending–doesn’t have value. What you need is an attitude adjustment in your approach to saving. Here’s how smart investors approach saving:
Saving Creates Smart Consumers
If you save money, you’re less likely to throw your money on unneeded goods that you can’t afford. You’re less likely to build up bad debt. Smart consumers also force businesses to be smart producers.
Saving Money To Make Money
Saving should be a way to re-deploy and grow your wealth. It’s called investing or trading.
Saving Money Can Expand Your Comfort Zone
I think you should have an emergency fund–a stash of cash on hand. Experts recommend three to six months of expenses. Creating an emergency fund should build your confidence and allow you to take risks to fulfill your dreams.
If you can approach savings–not hording–with an attitude that you’re generating more wealth and making your personal financial IQ a bit smarter, then saving becomes a force of good, not a source of fear in your life and in the wealth-intelligence-starving world around you.
Business Strategy, Dreams Come True, Investing, Online Investing AI
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is one of my favorite financial books of all time. It's an allegory about a guy who has a terrible job, and how he overcomes challenges to achieve his dreams.
