Have you ever considered whether there are any ‘wealth blocks’ sitting in your path? These are attitudes or feelings which are unconscious responses to our experiences and conditioning that prevent us from achieving our true wealth potential. I go into these further in my bool 10 Biggest Wealth Blocks of Women, but for now I would like to talk about one of the big ones: the Great Saver!
In my experience, there are two types of women: great savers and great spenders. The great savers firmly believe themselves to be much better managers of money than the spenders, after all, they are much more frugal and don’t tend to be lining up to buy the latest Hermes handbag.
Not to put down saving at all, of course it is an important part of ensuring financial wellness, but if you’re talking about actually building wealth, you need to be able to take action beyond saving and start looking at investing to grow your asset base.
Here is the thing with great savers: they often have more fear attached to parting with money than the spenders and therefore find it much more challenging to take some risk (as you need to do with investing). A great spender can harness their spending prowess to become a great wealth builder whereas a great saver can struggle to let go.
Here are three reasons why being a great saver will not make you wealthy:
- Saving has a sense of scarcity and ‘lack’ mentality attached to it. If you get caught up squirreling away your money out of fear, you will miss the very real opportunities that exist around you to branch out and prosper. Have you ever noticed that it is those with an attitude of abundance that tend to become very wealthy? That is because they are constantly looking to create more value in the world and, in turn, get paid well for that value. If you think about it in terms of reciprocity; simply put, you get back what you give out!
- Inflation erodes savings sitting in cash accounts. What is the current interest rate on your savings account? Over the last few years we have seen many occasions where the real rate of inflation is equal to, or even outstripping the interest rates on savings accounts and term deposits. This means that the real value of your money is eroded over time. You can put yourself in a better financial position in spite of inflation by finding other ways to grow your wealth.
- Savings are stagnant. Money is like water, it loves to move to the place of highest value! Your savings account is creating very little additional value. If you look at it like a bucket, those funds are slowly dripping in and growing, but little is created beyond what you have put in. Wealth building activities may start with a trickle, but as more opportunities come your way that trickle can flow into an ocean!
By all means save money! But I would say to you this:
Save for six months of hardship, invest for a lifetime of prosperity.
While savings matter, you only need to save so much. Instead of creating budgets to save as much as possible, create budgets to save some and invest the rest. Invest your leftover capital into long-term sustainable assets that will grow in value over time.
And to the spenders? Frivolous spending simply will not make you wealthy, but if you channel your spending into the accumulation of solid, long-term assets, this is the key to becoming sustainably wealthy.
Let’s shift focus to creating a larger, third group of women: the Great Investors. The truly wealthy do not ‘save’ money, they focus on creating money and investing it to produce further wealth.
Which group would you rather belong to?