The real reason rich people save money (has nothing to do with money)

This post is from the Wealth Building Wisdom Category and explains why the rich save money. To read another post that uses Proverbs like this, check it out here.

Proverbs 21:20 ESV – There is treasure to be desired and oil in the dwelling of the wise; but a foolish man spendeth it up.

It seems little comfort on the surface to those who are poor or middle class. Congratulations, wise man. You have treasure and oil in your house. If that ever happens, I’ll have to remember not to spend it all.

Let’s combine it with another verse.

Proverbs 13:7 ESV – One pretends to be rich, yet has nothing; another pretends to be poor, yet has great wealth. 

Which one do you think is wise and which one is foolish?

At one point, I drove a 2003 Toyota Camry (in 2016) that had a bent hood. It looked TERRIBLE.

It looked so terrible that I parked at the side of the church building I was attending at the time because I was embarrassed to be seen climbing out of it. Looking back, I shouldn’t have been embarrassed. I had the money to fix it, but chose to prioritize saving at the time. Three years later, I had to prove financial soundness to my graduate school before I could be admitted for a masters degree program. That decision and several others like it enabled me to get an MBA.

Why the Rich Save Money (Non-Financial Reasons)

Because while we can and should invest, those returns are not 100% in our control.

According to Morgan Housel, author of The Psychology of Money, “the value of wealth is relative to what you need.”

Therefore, if you ‘need’ less, you’ll not only get wealthy faster, but you’ll also have an easier time holding onto it.

You’ll need less if you care less about the opinion of others. For example, if you see wearing a nice watch, you might admire their watch. However, you probably have no real opinion of the person wearing the watch. If they were your friend before, they still are now. Never met them before? They are still strangers. If you met this stranger again next week not wearing the watch, you might not even recognize them. 

Realize that if you had that watch, most people would react the same way to you.

Here are the nonfinancial reasons to save money:

• Peace of mind. Many who grew up wealthy have a lower stress level even when in the same circumstances as a poor or middle class person. They have a certain self-assurance. It’s not cheap, but saving over time can give it to you.
• It gives you the ability to wait, rather than jumping towards the first opportunity that comes around because rent is due.
• Time to think. If you think, you’ll probably make better decisions.
• If you get sick, you have time to rest and recover.
• If you’re laid off, or bullied at work, or burned out, or just want to try something different, you can quit within 1-10 business days and just do something else when you’re ready.
• You’ll have more flexibility. You’ll be able to learn skills, try different niches, go at a slower pace, and recognize good opportunities when they come around.

Peace You Can Use

One last quote from Housel: “Having more control over your time and options is becoming one of the most valuable currencies in the world.”

So how much should you save as a business owner? One month’s payroll and operating expenses is a great place to start. From there, train someone to replace you. Then, keep saving until you have enough of the above points to be satisfied with what you’ve built.

To help lower expenses, save 80+ working hours of your year, and get the most out of your deductions, contact me for a free bookkeeping evaluation and strategy call.