How To Save Money Effectively

You would like to improve your finances, and you wonder how to save money? It’s true that it’s not always easy. We can work more, try to make more money. But often, when incomes rise, expenses also increase mechanically. That’s why earning a lot of money does not necessarily mean you’re rich.

On the contrary, one can earn a fairly modest salary, but know how to save money effectively. I will explain how. This article is the first one I published on this blog. I have updated and completed it so that it gives you a maximum of advice to save money effectively. You will also find my feedback on the principles outlined in this article. Good reading!

It is often believed that being rich, it is wearing a lot of outward signs of wealth: beautiful house, big gleaming car, clothing brands, jewelry, brushing, and perfect manicure … That’s what TV and magazines people want to make you believe. But in reality, being rich is not that. Because if you try to comply with this standard, buying all these things, you may well end up poor.

The big difference between rich and poor

To be rich is to have a maximum of assets, that is to say, goods that produce money for you. For example, apartments that you rent, a company that you created and that brings you money, stock market shares that pay you dividends, and so on.

As we learn from the book Father Rich, Robert Kiyosaki’s Poverty (which I really recommend), the rich buy assets (which produce money for them), and the poor (and the middle class) buy liabilities (assets that lose value and do not enrich them). This is why the poor are poor, and why the rich are getting richer. The goods I listed above are passive. The big car is expensive to buy and maintain, the beautiful house too, just like designer clothes, and the rest. You can buy that when you’re already rich, but you get poorer if you do it before you’ve reached financial comfort.

The essential advice for getting rich

It’s expensive to look rich. And once the money is spent trying to look like a rich man, there is nothing left to invest in assets that could really enrich you. I can give you some advice to follow absolutely: Live below your means. That’s how you save money. Yes, the rich live below their means. They do not spend all their money but know how to save, then invest to get rich.

However, living below his means, or reducing his lifestyle, these are expressions that we are not used to hearing. That may be why few people manage to get rich. Living below your means, it does not sound very sexy, and yet it is THE essential condition to achieve to put money aside, and therefore to get rich. This brings a lot of problems (debt, being caught off guard in case of a hard blow, no savings, no assets, and therefore no enrichment).

To live below one’s means is to go against the current of what the consumer society expects of us. And that’s what a lot of rich people do. The rich of “real life” does not look like the rich you are shown on TV. Besides, I recommend you to drop the TV and its ads that push you to consume and waste your time. The time you could use to enrich yourself, precisely.

As proof of this, the book The millionaire next door, which is fascinating, shows that the vast majority of millionaires do not look like rich people. They live like everyone else, dress like everyone else, and drive a banal car. You could not even suspect that they are millionaires.

By the way, if you want to know more about this great millionaires study, you can read my summary of The millionaire next door. You will learn a lot about the habits of the rich, which should give you good ideas to apply in your own life if you want to look like them.

So I was saying that very often, we could not suspect that this person who we meet on the street is a millionaire. And that’s precisely their secret to getting rich. They spend little and save a lot of money. And they buy with this savings asset that enriches them little by little.

To live below one’s means, concretely, what is it?

It’s just not spending all your salary, but saving a share of it. It voluntarily reduces his lifestyle by refusing to display external signs of wealth to give himself an image. Remember that trying to look like the rich (or rather the image of the rich), is an attitude that impoverishes.

This implies having a “frugal” lifestyle (which does not mean austere). It is the fact of not giving in to impulse purchases and thinking about expenses in order to optimize them. We must continue to have fun, but in a thoughtful way, learning to be satisfied with simple things.

A deliberately provocative example: If you drive in Twingo but are able to save a significant portion of your income and grow that money, you are rich (or a rich future). If a big Mercedes bought on credit is sleeping in your garage, be careful … you are getting poorer. It does not matter whether your neighbors think you are rich or not. To progress, one must detach oneself from the eyes of others. Do not try to race who will have the best equipment, or the most beautiful car, or the most exotic holiday destination. This habit is too expensive and will impoverish you.

Why live below his means?

What is the use of living below his means? To be able to save money. This is the basis for getting rich. These savings will be used first to create a security fund (at least 3 months of expenses) that will take a possible blow and avoid the use of consumer credit. To avoid the credits so, it is really important to have healthy finances.

After building your precautionary fund (or security fund), your savings can be used to invest in assets, for example, to anticipate a decline in income at the time of retirement. For me, this is my main objective, because I am convinced that retirement pensions if they still exist in 30 years, will be reduced to nothing. It can finally make it possible to achieve one’s life goals, or to indulge oneself occasionally (travel, etc.).