Money Psychology 10: Save money
Building wealth has little to do with your income or investment returns, and lots to do you’re your savings rate.
Let’s take a story.
In the 1970s, the world looked like it was running out of oil. The calculation wasn’t hard: The global economy used a lot of oil, the global economy was growing, and the amount of oil we could drill couldn’t keep up.
We didn’t run out of oil, thank goodness. But that wasn’t just because we found more oil, or even got better at taking it out of the ground.
The biggest reason we overcame the oil crisis is because we started building cars, factories, and homes that are more energy efficient than they used to be.
The same is true for our money.
If you view building wealth as something that will require more money or big investment returns, you may become as pessimistic as the energy doomers were in the 1970s. The path forward looks hard and out of your control.
But if you view it as powered by your own frugality and efficiency, the destiny is clearer. Personal savings and frugality (read it as efficiency) will be as effective in the future as they're today.
Savings can be created by spending less. You can spend less if you desire less. And you will desire less if you care less about what others think of you. Yes, money relies more on psychology, more than finance.
And you don’t need a specific reason to save. Savings without a spending goal gives you options and flexibility, the ability to wait, and the opportunity to pounce.
You’ll have a better chance of being able to learn a new skill when it’s necessary. You’ll feel less urgency to chase competitors who can do things you can’t, and have more leeway to find your passion and your niche at your own pace.
You can find a new routine, a slower pace, and think about life with a different set of assumptions.
The only factor you can control generates one of the only things that matters. How wonderful.
[The Psychology of Money: Lessons 10 of 18]
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