Wednesday, September 24, 2008

Saving: The Key to Wealth

Saving is one of the easiest ways to slowly and steadily build your wealth. It is too easy for some people and they want other "not so easy ways" to get wealth. So many people today are running in negative credit card debt. Negative means you stole the money from the bank and not returning it now. It means that you stole the money that belonged to someone else. It isn't any less than a bank robbery.

Now start saving because Banks are giving good interest rates and any money you save is the money you earned.

Saving money aside in a bank account with high interest rate will make your money worth what it really is worth. Let me give you an example: The average rate of inflation is 3%. Which means if you have a thousand dollars next year they will be worth $970. But if you put the same amount of money in a savings account or bank account with high interest rate your money will grow to $1040, assuming the interest rate is 4%. This $1040 is only worth $1010 due to the inflation. Now you see that saving money and putting it into a bank makes sense.

Many people don't realize that they are losing money by not spending it and keeping it at home or in a piggy bank. Now of course I used only a $1000 example so most people could understand the concept of inflation and realize that any spare cash at home is losing its value without even being spent.

How to save? is the next big question. You have to realize that every dollar you save every day is worth a lot of money. If you addicted to smoking and smoke pack a day, you are paying heavy price to kill yourself. It is stupid when people buy $7 cigarette packs every single day. Have you ever calculated the cost?

365 x $7= $2555, Smoking for 30 years? = $76650! You spent $76k on doing something that would kill you.

If you don't smoke then you are already $76k richer than smokers. Now for an average person who doesn't smoke. Cut on simple costs of food. Food costs variate a lot as you go from town to town and people often spend money on fast food when they could purchase many better things.

Morning coffee= $2, you drink it everyday till retirement= 365 x $2 x 50 = $36500. Now lets say instead of drinking coffee from a coffee shop, you made your own coffee which costs around 60 cents to make at home.

Then you save: $25550! Now put that in fixed deposit for 10 years at an average interest rat of 4%. You earned 25550 x 0.04 x 10= $36000. You earned 36k by drinking clean coffee at home. These are just very basic and small examples. Imagine if same rules were applied if you bought cheaper car, cheaper groceries, made food at home, that would just make you a millionaire by the age of 50, if not sooner!

Live life. Don't save on every little thing. Spend on what you need and you can afford. Don't waste on drugs, fast foods, short lasting clothes, etc.

No comments: