The 21st century is now all about what you do to earn a living: get a degree, ask for a raise, startup a career, and the list goes on. And there are countless advice on how to keep that money — whether by saving, investing, or spending less — isn’t just glamorous as you think it is, but in a nutshell, its really important. There’s a very good reason why you have to focus more on the money you have than focusing on the money that you earn. We’d explain.
Related media: How To Save Money Fast – 18 Money Saving Tips
My Mind On My Money, And My Money On My Mind
If you ask money guru Sam Dogen of Financial Samurai, he claims the money you make isn’t important as the money you have. Here’s the catch: If you think that your job is guaranteed, spoiler, it isn’t. You could get fired. Your company could go bankrupt. There are countless reasons why you don’t have to rely on your job, and chances of showing up at work and having to leave with your things in a box is uncertain. Forgive us if you think we’re being pessimist, but that’s the hard truth.
Even if your job security is ironclad, emergency expenses could show up and turn your paycheck into shreds. This points to the fact that saving a portion of your income is crucial. (If you plan on having a budget, you can use the 50/20/30 rule). You’ll be much more secure if the inevitable happens; and if the inevitable doesn’t happen, you’ll be in a very much secure financial position when you retire.
A 2013 meta-analysis published in Clinical Psychology Review found that the likelihood of having a mental health problem — like depression or anxiety — is three times higher among people who have debt; and a 2018 study published in the Journal of the American Medical Association (JAMA) also found that a sudden financial loss was associated with a higher risk of death. Ignoring your finances isn’t just a bad idea; it’s a health concern. This mindset can also start a positive feedback loop.
Save And Invest, Or Pay Income Taxes
Truth is, real time wealth isn’t earned by how much income you’re making, but by how much money you earn in the very long term from your savings and investments. There’s a pretty good reason why majority of the world’s billionaires come from the finance and investments industry — portfolio investors and hedge fund managers. They spend their entire time growing up their wealth from other people’s businesses, so they know a thing or two about having money, a lot of it. What we’re trying to say is that, when you focus on having more rather than making more, you’ll be well equipped with decision making.
“When you just focus on making more money every month or year, chances are you’re a worker bee and more short-sighted than the person trying to generate wealth through equity in a business,” Dogen writes.
There are more reasons why you need to focus on whatever you have over whatever you earn. As Dogen points out, the government only taxes your income, not your savings. Even if you have millions in the bank, you’ll only be taxed on the interest; and the same goes for healthcare subsidies and child tax credits and other nitty-gritty tax details — the smaller your income, the more you’ll get back from the government.
The Experts Advice
The best advice is never the flashiest, but there’s a reason boring rules like “don’t spend more than you make” and “save a portion of every paycheck” have never gone away. It’s made a difference in Dogen’s life, for one.
“I thought I would feel rich once I hit $100,000. I did for a nanosecond, but saw temptation and taxes take a lot of it away,” as Dogen concludes. “I’ve made much higher incomes and thought I would feel more secure too, but I didn’t really. Instead, every single dollar I put away towards savings or stable investments made me feel much securer instead.”
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Written by: Nana Kwadwo, Wed, Apr 03, 2019.