Regarding the method of accumulating wealth, people now have a general view that "money is earned, not saved." That is equivalent to saying, "People with high income will have more wealth." Is this really the case?
Whoever wins the first prize in sports lottery has already realized F.I.R.E. No longer need to be busy with life, and time can be used to do what you like to do. This is not the case. Many people who won the first prize quickly turned back to their same life as before. Human nature pursues happiness and avoids pain. Once you have money, more things you want will be born and higher consumption will be born.
For those who do not manage their finances at all, only use the money to the bank, and use as much as they have, money is indeed earned. Because work wages are their only source of income. But this is not the case for those who have achieved F.I.R.E.
The uses of income are divided into savings and consumption. Savings can be invested, just like a golden goose that can lay golden eggs. Investment is the second source of income, passive income.
The more savings, the more principal it can be used for investment and the more passive income it can create. Every penny saved now can bring income to your future self. If we can achieve an annualized return of 10% in investment, then the money we saved can double in 7 years. If we can achieve an annualized return of 20%, it will only take 4 years to double the money we saved.
Imagine that in the future you have a farm golden geese, these golden geese are constantly laying golden eggs for you, and the number of these golden eggs is enough to ensure your living standard. Will you be grateful to yourself who is working hard to save money and keep money to raise golden goose now?
The primary condition for whether a person's wealth can grow is whether he can save money from his income; and making money is to add an accelerator to wealth accumulation. If we only make money and don’t save money, we will not have the opportunity to accumulate wealth; if we only rely on saving money, but our salary income is very low, although wealth can be accumulated, its growth rate will be very slow.
Any solution to any problem is to take the middle path, and the two extremes are dead ends that cannot be understood. Therefore, wealth accumulation requires saving money and making money. High income and low consumption are the ideal state.
In fact, newly graduated college students began to accumulate wealth in the golden period, mainly based on two reasons:
First, it is easy to go from frugality to extravagance, but it is difficult to go from extravagance to frugality. The consumption level of college students is not very high. If they can maintain their original consumption level after joining work, they can save a lot of funds.
Second, there is no financial pressure at this time, and parents are likely to not retire yet and do not need to support them; they have not yet started a family for the time being, and there is no expense to raise children.
So, when you are young, you must work hard and have a great chance of achieving F.I.R.E before the age of 40. If you miss this golden opportunity, you don’t have to be discouraged. The best time to plant a tree is ten years ago, followed by now. Please start accumulating investment capital now.
Finally share a story about an oil seller.
A long time ago, the end of the year was approaching. There is an oil seller who wants to buy New Year’s goods, but he has no money. At this time, his wife took a can of oil out. The oil seller asked strangely, "Why do you have such a big can of oil?" His wife smiled and said, "Every day when you go out to sell oil, I will secretly make a spoonful of oil from your oil barrel and put it in this clay pot."
The oil seller was still puzzled and continued to ask, "Why haven't I noticed it?" The wife replied, "Because I only make a small spoon at a time." The oil seller now understood. He took the can of oil to sell it and bought the New Year's goods with the money he had sold. The whole family happily spent a happy New Year.
This is the power of accumulation over time. As long as the time is extended, quantitative change will cause qualitative change. So don't underestimate the little savings every month.
