Why Saving Less Is the Secret Key to Real Wealth

I didn't grow up in a family that had a lot of money or talked about money. A lot of us are like that. I'm not alone. But the point is that nobody really gave us the blueprint for building wealth, the blueprint for investing. Some of us were taught the fear and the nervousness about putting your money into some type of investment. Our parents and our grandparents, they did the best they could. Let's keep it real, they did the best they could. No fault of theirs, not blaming anybody. But this tradition of fear of investing is something that has been passed down. And now we got to change all that and we can change all that. Guys, if you're trying to save your way to wealth, you're actually planning your way into poverty. Look, it ain't happening. You cannot save your way to wealth. You can save as much money as you think that's humanly possible to save. But saving your way to wealth just doesn't work. You don't get rich or you don't build wealth just through saving. You get rich and you get wealthy through investing. And we're going to talk about that on this video. Look, saving and investing are two entirely different things. Yeah, they may be first cousins, right? But they ain't the same. Saving is fine and it's good. Saving money is a good thing to do. But it's only good to an extent if you're trying to build some wealth. To get to the next level in terms of your wealth building and financial freedom and all that good stuff, you got to be willing to invest your money. Put your money to work. Employ your money. You be the employer and your money is the employee who's going to go out and work for you. You employ that money. Put it to work. Look, most people are taught. Let me change that. Some people are taught to save money. But the saving money mindset is exactly what's keeping a lot of people broke. So I want you to stop saving so much money. And on this video, I want to challenge some of these traditional ideas that saving a bunch of money equals some type of security or that saving money is the key to build wealth because it ain't. In my opinion, saving too much money is a huge problem. It's a myth of epic proportions because it really hurts people more than they think. Let's just talk first about inflation. Inflation is the silent killer that a lot of people don't really understand until they get to be about 30 years old and they think back to when they was 20. You realize that you used to spend $100 a week on groceries to feed yourself or your family, whoever. Right. But now when you get to be 30 years old, you find out that $100 a week. How was I doing that? Now I got to spend $200 a week. And then you start thinking to yourself, OK, so that is what inflation is. And you're right. That's exactly what inflation is. Look, $10,000 saved up in a bank somewhere 10 years ago is going to buy you a whole lot less than that $10,000 today will because inflation eats away at your money. It erodes the value of the dollar. Right. When everything increases and goes up in price. Remember, inflation is just the rate at which prices increase and the price of everything increases in value because that's what keeps this machine running called America. Right. And keeps capitalism and the growth of everything growing constantly. But this is the main problem with inflation. A saved dollar today just sitting around in a bank somewhere or under a mattress somewhere and a safe in your home is being eaten up by inflation because everything constantly gets more and more expensive. Let me give it to you in numbers. The average savings account at the average American bank last year, the average rate of return was about point four one percent. That's the average annual rate of return for a regular savings account at a regular bank in America. Point four one percent. That's less than a half percent interest that you'd be gaining on that money. However, inflation last year was running about about three and a half percent. Do you see the problem there? You have your money stuffed away and say that a bank getting less than a half percent rate of return. However, inflation is at three and a half percent. Your money is being ate up by inflation. You're losing money slowly by saving money. And a lot of people save money as a way to feel secure or have a sense of security. But that security is really just an illusion. There's a lot of people who save a whole bunch of money and by the time they get ready to retire, they find out, man, I barely have enough money for retirement or emergencies. Yeah, I saved up 20 and 30 and 40 thousand dollars over the course of 20 and 30 and 40 years. But look, that ain't enough to live on because inflation has eaten away at the dollar over those years. Here's another big problem with saving money. Some people think I'm playing it safe by saving a bunch of money, but actually saving a bunch of money is more risky than you would imagine. Right. Most people are avoiding investing money and they're gravitating towards saving money out of fear or out of being scared or nervous or not quite sure about what's going to happen. Is their money going to grow? Are they going to lose money or make money? And so most people avoid the risk that they think is involved with investing by taking another risk by saving a whole bunch of money and holding on to money and stuffing money up underneath the mattress or something. But listen, you have to let money go to let it grow. Fear and avoiding risk, that just assures you that you're going to have some long term struggle with money down the road. So trying to avoid risk and saying I'm going to hold on to my money, I'm going to put it in the savings account down the street at my local bank. You're trying to avoid risk. But when you try to avoid risk, oftentimes that's risky, too. In fact, it's probably more risky than just saying I'm going to invest my money and make good solid investment choices and decisions that I've researched and done my due diligence over. Right. Think about it like this. The stock market over the last 20 years has gained about nine to nine and a half percent in terms of an average annual rate of return over the last 20 years. That's nine percent. Now, think back to what I just told you. The savings account down the street at the bank that gave you a rate of return of less than one percent inflation last year. Inflation has typically been around two to three percent. But if you invest money in the stock market, you're averaging a return of nine percent. Do you see what I'm saying about investing? Right. Instead of throwing so much money into a savings account, you need to be throwing money into investing the money to see the money grow. When you save so much money that I see a lot of people saving, you're just making yourself poorer over time, as opposed to if you had invested where you make yourself wealthier over time. Right. It's almost because of inflation. It's almost mathematically impossible for you to build any substantial wealth through saving and saving so much. But here's the deal. I see so many people who are scared of the stock market. They're so scared of the stock market that they really put their money in the local bank and get up about point four percent less than one percent. They would rather do that than take the risk of investing the money to grow the money. Now, part of the problem is this. A lot of us have been fed a lot of false narratives about money. Let's just be real with it. Right. And when I say for a lot of us, I'm talking about me included because of how I grew up. Right. I didn't grow up in a family that had a lot of money or talked about money or a lot of us are like that. Right. I'm not alone. But the point is that because of the way we were taught about money, nobody really shared these numbers with us. Nobody really gave us the blueprint for building wealth. Right. The blueprint for investing. Right. We were some of us were taught the fear and the nervousness about putting your money into some type of investment, the stock market, bonds, ETFs, index funds, whatever it could be. Right. A lot of us were taught that that's scary and risky. And we weren't taught that not investing is scary and risky, too. Right. Our parents and our grandparents, they did the best they could. Let's keep it real. They did the best they could. No fault of theirs. Not blaming anybody. But this tradition of fear of investing is something that has been passed down. And now we got to change all that. And we can change all that. And a lot of us, we end up saving a whole bunch of money. But guess what? We end up like one economic downturn from being broke, one economic downturn, one bad decision or one bad year in the in the stock market or one bad year of inflation, high inflation. And we end up broke, poor, scared, busted, disgusted. And in a cycle of poverty, a cycle of paycheck to paycheck, because for 15, 20 years, we've been saving a whole bunch of money when we should have been investing a whole bunch of money. Look, you cannot build anything on this planet if you don't take risk. Look, you can't build a friendship. You can't build a building. Right. You can't even build a tower of blocks that kids play with. You know, little babies play with blocks. Right. You can't build a tower of blocks if you don't address fear. Right. And take some risk. Now, let me talk a little bit more about what wealthy people tend to do when it comes to saving money, investing money and growing money. Look, wealth is built on taking on the risk of assets and ownership. So assets and ownership are byproducts of risk taking risk. So owning stocks, owning a business, owning real estate, that's the key, not saving a bunch of money because you're nervous and scared to do something with that money. No, you've got to take the risk of ownership, the risk of building some assets. Right. Rich people, wealthy people, they use money as a tool, not as a storage unit. Right. They put money to work through investments. Right. Instead of trying to hoard money in a savings account at the bank down the street, it's a mindset shift from a saver to an investor that a lot of us have a big problem with. And it keeps us poor. It keeps us close to poverty. Right. You have to make money move. So you have to take money and move from fear into strategy. You move out of the whole fear realm and you move into how can I strategize with money? Right. So here's what you got to do. Here's some things that you can do because I don't want to do a video without giving you some practical things that you can actually do to shift this mindset from a saver to an investor. First, let me say this. I want you to have an emergency fund of money, right? An emergency stash of money that you could get to when you need to get to it. Right. But I don't want you to keep too much emergency money. A lot of people, they keep $40,000, $50,000, $60,000, $80,000 of emergency money sitting around. For most of us, that's a problem. Now, with that said, let me say this. If you are an older person, let's say you're in your 60s or your 70s and you're not really accumulating more money right now, but you're actually living off the money that you put to the side in an investment or savings, wherever it is. If you're living off the money and you want to protect that money from market downturns, right? Kind of like we're in right now where the stock market has taken a dip. If you're older and you want to protect that money, let me speak to you for a minute because a lot of people don't speak to 60 and 70 year olds about this, but you need to know this. If you're older, over 60, over 70, and you're using your money, you should move a larger chunk of your money out of the stock market and into more what we call fixed assets, right? The cash, the CDs, the bonds, more of those safer places. If you're actually at the point of your life where you're drawing from the money to use to live on. In other words, let me put it like this. Give an example. If you've got $500,000 stashed away and you're 65, 75 years old and you're trying to use the money and you want to protect a portion of that money, then you need to take out about $100,000 from that money and put it in a safer environment like a savings account or like a CD or like some bonds, but then leave your other 400 in there. And here's why you want to pull out a little bit of money if you're older is because when the market goes down, the stock market, you don't want to be drawing from all of your money to live on. You want to be drawing from that $100,000 that's in a more fixed, safer asset. Why? Because you don't want to pull from your big stash of money invested in the stock market when stocks are down because all you're doing is selling low. That's the opposite of wealth building. So when the market goes down and you're older and want to be drawing that money out, you need to be pulling from your fixed assets because if you pull from your stocks, the things that are fluctuating and are down at the moment, then again, you're pulling money out low and you don't want to pull money out low. You want to pull from that stash that's from fixed income, CDs, bonds, cash when the stock market is down. Now look, that's for my older people that are at the stage of life when they're actually trying to pull money out and use it, right? You may not want to keep all of it sitting in the stock market fluctuating up and down and you getting upset and you getting mad and you about to have a fit because you're losing all your money. Go ahead and pull a chunk of that and keep it in a safer investment. Now listen, that's not most of us. Most of us that are watching this video, I need you to only have your emergency money in the bank, in a savings account, a high yield savings account, right? Somewhere you can get to it quickly. For most of us that aren't, if we're still in that accumulating stage when we're trying to build wealth and grow wealth and all that good stuff, we're not drawing anything out, then you need to have a little bit of emergency money, three to six months of your emergency money and everything else needs to be invested. So when we have these conversations about money, there's no one size fits all, but there's some general things. A lot of times people don't address people that may be at a different phase of life and are over the age of 60 or 70 or 80 years old and they're trying to pull that money out and they're watching all their money go up and down when you should be letting that money go up and down and don't trip on it, go pull from your other money. But for the vast majority of us who are not at that stage of life, only a little bit of money in your emergency cash or CDs or bonds or fixed assets, right? Just a little bit to cover an emergency. Everything else for most of us, you need to be investing that money so that money is employed and working. And if you're older in that stage, I'm not telling you to pull all your money into fixed assets. I'm telling you to pull a small portion of it, 20% of it, 30% of it and put it somewhere where it's safe and you can draw from it in these down times in terms of the market. Remember, saving less is the key to greater wealth, right? Let me say this, nobody in these internet streets are talking really about risk. Every time we deal with money, we need to be considering and thinking about risk. You cannot completely avoid risk when we're talking about money. You can only mitigate it, prepare for it, strategize for it and limit it. But there's always risk, right? You have to take calculated, educated risk always when we're talking about money and finances. But risk is always going to be there. You ain't getting rid of risk no matter what you do. Now, if you're new to investing, let me say this, look, start small, but be consistent. Start small, but be consistent. I'm encouraging you on this video to save for emergencies and then invest more, invest the rest, save less. And if you're new to investing, hear me closely, start investing with index funds and ETFs, not single stocks. Look, there's a lot of reasons I say that. Primarily, when you're investing in index funds and ETFs, it's easier to invest in those because it takes less research, less study. It takes less learning. Now, I'm not saying it's easy to invest in index funds and ETFs, but it's a little more intricate and a little more involved when you're picking stocks and trying to figure out what stock you want to actually or company you want to put your money into. Believe it or not, guys, it's easier to evaluate a bucket of stocks in an index fund or a bucket of stocks in an ETF than it is to actually evaluate an individual stock when you have to go look at 10 Qs and 10 Ks and understand free cash flow and understand income statements, understand how they make their money and do some research, read the footnotes. If you're new, that's more intense than just doing some research about an ETF or index fund and investing your money there. That's just a little tip for you if you're new. But the kicker is you've got to start flexing this investing muscle and get in the investing game. Remember, you do not get rich from saving money. You get rich from investing in assets and ownership and taking some risk. So I hope I was able to help you guys understand the importance of saving less money and investing more money and why saving less is the key to real wealth. Listen, if you got value out of this quick video, do me a favor, smash that like button for me. Hey, if you want to know what to invest your money in, here are four assets that I'm buying and I'm never selling. Check out this video next. Peace.