You Are Actually Losing Money by Saving Everything

You are a young man, and you start getting some pocket money, either from your family or from a part-time job.

You can make the #2 mistake even with this small income — save all your money (#1 is gambling).

How do you stop saving everything but, in the meantime, avoid impulsive buying? What is the world’s best and safest investment?

Do not get me wrong. I am not saying to stop saving, and I am not pushing you to change your financial habits.

As you can see in my article here, I’m stressing the importance of savings for a rainy day, taking into account the global financial crisis of 2020 after the global pandemic outbreak.

Nonetheless, saving every single penny you get is something that becomes pointless after some time, and this text clearly shows you why.

You Don’t Know Why

This is the most common problem when you get $200, and you put them on the pile of your other $800.

Why? Ask yourself. Why am I doing this?

The only thing that I might want to hear is that you are saving for a significant investment (which is also wrong if you ask me because there is a high risk of losing everything).

Nonetheless, most people who are saving do not have a long-term ambition or a goal, and it takes a little lack of discipline to see a depreciating asset you like and start spending recklessly everything you saved the last 2 to 4 years.

I do not even want to think about the case that you are saving for more than one year to buy an asset that will only stop you from being productive every day (something like a PS5) because I find this is the worst-case scenario.

You Are Saving Just for Temporary Pleasure

Unless you are a prestigious gamer or someone who has a fair number of followers in Twitch (not all of your friends who support you no matter what), you will be bored of your PS5 in a minimum of 2 years.

Furthermore, this is applied to all cases, not just spending all your savings for a console but also for any asset that loses its value the moment you open the sealed box.

So what you are thinking is that I will sell it when I am bored. Will it have the same value as the year you bought it? Won’t the price of a sealed one have fallen considerably? Won’t your asset get damaged after continuous and relentless use?

I will be more than amazed if the answer to each of these questions precisely what you would like to hear. But it is not.

Everyone has their opinion, and you can do whatever you want with your money; what I am saying is that whether you like it or not, this is a dumb decision in terms of saving for an extended period to feel pleasure for a short one; provided that you do not have another serious source of income.

I am saying this; make smart investments and simultaneously save a proportion of your money for a rainy day.

This article will not reveal the secret, magically quadrupling your money (there is no such article).

It’s one of the articles, however, that will help you think a little bit differently.

DO NOT GAMBLE

As you can tell, I am against the notion of gambling. Nevertheless, if you are not, have the discipline not to spend more than 5% of your savings.

Gambling is a losing game. You win, and you want more, so you play again. You lose, and you want to cover your losses, so you play again.

You will be back in the ‘how to make money online in 1-hour videos’ in no time.

Be smart enough to gamble with $15-$20, act like you have lost the money already, and see what happens.

Don’t get greedy with gambling, and don’t expect to get enormous profits. The risk is 10 times higher than the reward.

Final Advice: If you could avoid gambling, you will always be better off.

The Safest Investment

Find something you like, and you understand; investment is more than putting your money in a company you see a promising future in and just waiting.

Invest in yourself and be confident about what the future holds; to remind you of the previous example, do not start a Twitch channel and invest your money for a gaming setup, to give up in a month.

Start reading books that will help you with your idea. And stay faithful to it. No matter what.

Believe me; it is not about watching tutorials on Youtube that give you the magic trick which will make you a millionaire in a week.

Investing in yourself is my favorite investment, and that is because success is in your hands; your spirit, your work, your productivity, and your energy are valued.

You will not lose or win money based on the outcome of UFC 257 or what deal will the CEO of a company in another continent close.

The 50/30/20 Rule

One strategy that you can follow is there 50/30/20 rule of your monthly salary; this is a way of budgeting your money for people who cannot limit expenses.

However, we will have to switch it up to accommodate an average young man/woman’s needs and fulfill any future aspirations of getting a little richer every day.

This plan, proposed by Senator Elizabeth Warren, shows that 50% of your income should address your needs, 30% should address your wants, and 20% should be saved.

However, you might be a young man, without significant expenses for a house, great electricity and water bills, or any need to put food on the table and take care of your kids.

This is a critical point in your life when you have to choose between impulse buying or a significant increase of money in your account, 5 to 10 years down the road.

Let us suppose that you are taking a salary of $600. Provided that you do not have any housing debt, any family in need, or any enormous cost needed to cover, you could follow a type of 40/10/20/30 rule.

You will need $240 (40%) each month to invest in yourself so as in their long-term future, you will have the ability and the resources needed to be getting $240 a week or even a day.

Investing should be your primary and your only expense of such magnitude.

10% should go on the minimal costs you might have to pay, but you should adjust it based on your living conditions.

I would personally give no more than 20% of the salary; $120 in our case. You have to be mentally strong and faithful to what you want to accomplish in the future.

Do you want to buy Starbucks four times a week and pay off your student loan when you are 30?

Or would you prefer to have a simple homemade cup of coffee every day, but in the meantime making the smart investments that will get you to paying off your loan by the age of 25 and having an Iced Caramel Macchiato two times a day?

Similar to any proposal in this article, it is up to you.

However, you should know that by investing smartly now, you will be able to spend big later. Not the opposite.

The last 30% will be the small part that you should save for a rainy day, as mentioned before.

Personally, I am more of a 60/10/10/20 guy. But this is a challenging part of self-discipline. And no offense, but I do not think that you can make it.

Live Like You Are Broke

Once you start getting money and decide that you want to live rich by your early 20s, you have already gained the mentality to get you broke.

Once you start getting money and decide that you will live like you are broke, you have already obtained the winner’s mentality.

“If you are not disciplined, you will go broke. I do not care how much money you have”.

Missouri lottery winner Sandra Hayes

A woman possessing $224 million is saying that it is easy to go broke.

Imagine how much it could take you to be left with a PS5, some fancy clothes, a new iPhone, and no potential whatsoever to make more than $20 a day.

I recently came across an article that asked the question: How would you spend Bill Gates’ money? And there are even programs on the internet.

They are products of entertainment, obviously, but that is, once again, the wrong mentality. That is why Bill Gates, Elon Musk, Warren Buffet, and Jeff Bezos are who they are.

Believe me; they did not overspend the money they gained. And they certainly did not save every single penny from the get-go.

They invested everything they had in their vision.

You have to work for your money, but you have to make the money work for you as well.

Grant Cardone (Real Estate Multi-Millionaire)

Once again, it would be best if you did not stop saving money. You should keep that healthy addiction of saving, but you should reduce it and work more towards a healthier ambition of making money.

This article is for informational objectives only, and it should not be regarded as Financial Advice. This text is a personal opinion, and I would encourage you to consult a financial expert ere executing any financial decisions.

References

FiftyThirtyTwenty.com. “Financial Stability in America.” Accessed Oct. 1, 2019.

Whiteside, Eric. “What Is the 50/20/30 Budget Rule?” Investopedia, Investopedia, 20 Jan. 2021, www.investopedia.com/ask/answers/022916/what-502030-budget-rule.asp.

Hess, Abigail Johnson. “Here’s Why Lottery Winners Go Broke.” CNBC, CNBC, 25 Aug. 2017, www.cnbc.com/2017/08/25/heres-why-lottery-winners-go-broke.html.

Cruze, Rachel, and Anthony ONeal. “15 Practical Budgeting Tips.” Daveramsey.com, 8 Dec. 2020, www.daveramsey.com/blog/the-truth-about-budgeting.