The non-rich spend their money and save what’s left.
The rich save their money and spend what’s left.
One is a poverty philosophy and the other is a wealth philosophy.
Poverty Philosophy
According to my Rich Habits data, those who are poor never forge the important habit of saving money and, thus, are never able to invest. How can you invest what you don’t have?
If you were never taught this savings Rich Habit, you automatically default to the Poor Habit of spending all of your money. And if you spend everything you make, you eliminate any opportunity to create wealth, through prudent investment.
In effect, you abandon one of the least difficult and more certain paths towards accumulating wealth – Saving & Investing.
Wealth Philosophy
Saving money is crucial to creating wealth because only by saving money can you invest those savings.
And this Rich Habit – Saving and Prudently Investing Your Savings is one of the three paths to wealth I discovered in my Rich Habits research and often write about.
What makes this path so important is that it is within the reach of just about everyone.
Unlike the two other paths (Becoming a Virtuoso or Pursuing a Dream), it is the least sexy path towards wealth creation.
It does not require any special skills, innate talents, excessive risk or some outrageous work ethic.
The only requirements are saving at least 10% of your income and prudently investing those savings.
This Saving & Investing path takes a long time to accumulate wealth – an average of 32 years.
Also, in terms of the millionaires in my study, those who pursued this path were also the poorest millionaires in my study.
Nonetheless, it is one of the more certain and least demanding paths to creating wealth.
The wealthy who Save and Invest force themselves to survive off 80-90% of their net income by automatically setting aside 10-20% of their income with every paycheck.
What I mean by automatic is – they treat saving as if it were a monthly bill – the first and most important monthly bill they must pay each month.
This Wealth Philosophy elevates Savings to the point where it becomes your #1 financial priority, or #1 monthly bill.
When you consider Saving as your #1 financial priority, you are then able to back-engineer your standard of living (i.e. keep it low), in order to ensure your ability to save.
How you think about money, your money philosophy, drives your money habits. If you have a Wealth Philosophy, you will see money as a tool to build wealth and forge good money habits, enabling you to save and prudently invest those savings.
About Thomas C. Corley
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