Is saving money your best strategy for getting rich? If it is, then you had better stop right now and find another way. No one has been able to build wealth just by saving money. Managing savings is a good discipline – it can give you a comfortable quality of life, but not a wealthy quality of life. The old-fashioned advice to save money and become rich is a myth.
When you save money, where do you keep it? In the bank, in a savings account or a fixed deposit? The interest that money earns is not even enough to beat inflation – so you are actually losing money in real terms, the value of your savings gets eroded by inflation, hence you are poorer than before! And if you have put your savings under the mattress or in your Godrej cupboard, then it will not earn anything at all and you will be worse off than if you had put it in the bank.
Quite a tragic state of affairs isn’t it? All that hard work, all that economizing and saving and you are nowhere near to becoming rich.
Only part of the “getting rich” story
Now, saving money is not bad – it is needed because it is the first step towards creating wealth. But it is only part of the “getting rich” story. It is one of the tools for enhancing your wealth, you need to look for other more powerful tools. In order to grow your money, you have to make your savings work for you, not lie idle. It has to work and beat inflation if it is to grow. The way to do this is to invest it such that you get positive returns from it.
Money makes money – to make big money, you have to make big investments by scouring around for opportunities. The really rich people in the world have reached that position by taking advantage of opportunities and not by just putting their money into a savings account.
Savings can lead to riches when it is invested i.e. put into ventures that will cause it to multiply and increase. The rich look out for such prospects and then put their money to work for them and create wealth. There is risk in this but as the old proverb says, “Nothing ventured, nothing gained”.
Why poor people stay poor
Poor people stay poor because they try to save by buying cheap things. The middle class collects debts and liabilities (buying on credit, borrowing money etc) instead of assets and the rich invest and get richer. The key to becoming rich is to think like a rich person, and change your thinking and your attitude from being a saver to becoming an investor.
Start by saving sufficiently for an emergency fund that is readily accessible for any major need. Once that is done, channelize your surplus funds into investments. Keeping surplus money in liquid savings is a bad choice – for it does not work for you and it depreciates in value. So do not have idle money lying around – invest it.
Now where do you invest? Do your research, consult an investment advisor, decide what your financial goals are, what your risk tolerance is (that is, how far are you willing to risk your funds) and see which of the available investment avenues suit your needs the best. If your risk tolerance is low, invest in safer, less volatile assets and if your risk tolerance is high, consider investing in riskier, more volatile assets.
So what are you waiting for? Start investing your money and get going on your journey to wealth and prosperity.