Can you become wealthy just by saving? 

 

I believe in reading broadly and voraciously, and that having done so is one of the major reasons I was able to lift myself out of poverty. I’m very interested to hear other authors of books on wealth secrets echoing this sentiment.

M.J. DeMarco, author of The millionaire fastlane: Crack the code to wealth and live rich for a lifetime, talks about being desperate to escape poverty, and attributing a significant portion of his ultimate success and prosperity to the books he read in the taxi limo that he drove as a poor young man. He would sit in his limo on cold nights, waiting for clients, and devour books about success principles.

Tony Robbins shares a similar story – although, in his case, he was homeless and living in his car. ‘Books were my way out,’ he tells his audiences, explaining that he consumed any book he could that would improve the quality of his life. Other authors share similar themes; almost all of them (myself included) believe in the core of their beings that wealth is all about knowledge and ideas. It’s about thinking.

I find it tragic that most of life’s complex riddles have been answered extensively in books, but that the people who need these answers the most generally do not read much at all. (Shockingly, it is estimated that only about one per cent of the South African population buys books in stores – that’s very nearly akin to saying, ‘Nobody buys books in South Africa.’) If you know these answers, you can copy and paste them into your own scenario.

Speaking of which, here is a quick quiz. How many times have you worried about money in the past year? Now, how many books about wealth have you read?

Some people even brag about how the last time they read a book was in high school. I find no pride in saying, ‘I choose to remain ignorant of the answers I need’ or ‘I’m poor despite the solutions to my problems being publicly available.’

My experience is that self-made successes are always adding to their own education. They hungrily seek out the ideas that will give them greater leverage and effectiveness in their lives and businesses. They are excessive consumers of coaching, teaching, books and articles, and they act on the knowledge they gain.

So, even if you don’t read any other books on wealth besides this one, I would encourage you to become the sort of person who is constantly adding to your own knowledge. I have done my best to ensure that this book contains all of the critical answers that you need. I may recommend other books on wealth (and I strongly recommend you become the sort of person who is always reading such books), but I do want you to get as much as possible from this one.

One wealth book that made a big impact on society was Robert Kiyosaki’s Rich dad, poor dad: What the rich teach their kids about money that the poor do not! I feel that this book should precede books like that one in your thinking.

One of the primary ideas in Rich dad, poor dad is that if you are generating more than you are spending, you are growing wealthier, whereas if you are spending more than you are generating, you are growing poorer. That is crystal clear and impossible to deny.

However, people tend to raise the legitimate question:what if I’m not earning enough in the first place? It may not be possible for me to save anything, because my expenses are already greater than my income.

For that reason, and a few others, my focus here is slightly different to Kiyosaki’s. I am especially interested in the nature of the ‘generating’ part of the equation. I feel that while merely keeping more than you spend is an effective path to wealth, is also a slow and passive one.

I’ve read a small mountain of books on the topic of wealth, all of which were useful to varying degrees. My great criticism of most of them is that they focus almost exclusively on saving and investing.

Even Tony Robbins’ book Money: Master the game, which is over six hundred pages long and includes detailed contributions from a plethora of top-level experts, essentially opens with, ‘… so, take your money and…’. It’s also reasonably heavy on retiring right. Safe retirement is a worthwhile financial goal, but it’s not the only goal.

Can you become wealthy just by saving?

Yes, you can. Compound interest is a powerful thing. It just takes a very long time. In The millionaire fastlane, DeMarco calls it ‘getting rich slow’ – the ‘wealth-in-a-wheelchair plan’.

An article in the December 2012 issue of Braintainment magazine draws attention to this principle, listing ‘Don’t die’ as the number-one way to grow wealthy. Funny, but true.

‘The explanation is pretty logical,’ the article says. ‘Old-timers have had more time to gather money by working, investing and saving. The gap between wealthy elderly people and young people is remarkably big and it’s only getting bigger […] If you take all the possessions and income of the average 65-year-old, then they will be worth 47 times more than the average 35-year-old (American) […] So avoiding getting hit by a bus will be the best advice to embark on your journey to riches.’ (Interestingly, the same article lists ‘Resign and become your own boss’ as the second most important thing you can do).

By way of example of how age and saving can equate to wealth, I have a second aunt who used this principle. She worked at a menial job all her life and earned a very humble salary. However, she also lived a very humble life. She got into the habit of saving right from her very first pay cheque. Now, in her seventies, she is a multimillionaire with a tax problem. That’s the kind of problem we all want to have.

I find her story encouraging, and it goes to show that saving can, and will, make you wealthy, over a great deal of time.

But we don’t want to be in our seventies before we can enjoy the advantages of wealth. And let me share a secret with you: the truly rich do not become rich by saving. They use the technique of saving to ensure additional income, and they are very savvy at protecting and growing their wealth, but saving is not how they became rich in the first place.

For most self-made millionaires, the creation of wealth was achieved through much quicker, more dramatic wealth-creation mechanisms. They started their own companies. They sold an invention. They cornered a market. They sold their companies. They created something that sells even while they are sleeping. They created a network. They owned and rented out property, or they generated something. They tapped into some simple rules of scale and reach to earn more money from more sources.

Then, after they had generated a great deal of capital, they began to save.

In The rules of wealth: A personal code for plenty and prosperity, Richard Templar writes, ‘When it comes to wealth-creation strategies, investing wisely and managing your money actively are important, but nothing beats having more coming in in the first place.’

 

It’s about generating large amounts of wealth, not saving small amounts

So, saving more than you spend will make you rich.It’s a sound principle. However, it is also a ‘Yes, but.’

I will focus on helping you to generate wealth in the first place, and to do so in the short to medium term, while you are presumably young and vital enough to enjoy it.

If you are able to generate more than the average person in the first place, then, when you start to practise the principle of saving more than you spend, you will have more money to work with, your trajectory to wealth will be shorter, and your total wealth will be greater in the long term.

 

My wishes for you

I don’t want poverty for you – or anyone in Africa. I don’t want you to work back-breakingly hard and not enjoy substantial monetary rewards. I want you to be rewarded for your labour, to prosper, so that you can focus on the things that move Africa, and humanity, forwards, rather than focusing on survival.

Survival is an old-fashioned problem; it’s dumb to be struggling with it. Our species should be grappling with more interesting problems, like exploring outer space and unravelling the nature of the universe. Some members of our species are doing just that, while others are sitting in dust bowls while CNN films the flies on their lips. That’s ridiculous.

It’s time for us to graduate to new and more interesting problems. Let’s stop worrying about where the clan will find food, and start worrying about how our starship will face down the Klingons.

I also don’t want to provide you with comforting lies, such as all will be well if you just start saving. You need the more challenging truth, and I will avoid all political correctness and cosseting niceties to give you just that.

The road to wealth is not a secret. It is a way of thinking. It is not a number of coins. It is an attitude. As a man thinks in his heart, so is he.

Take to heart this simple declaration: it can be done. If you are poverty stricken or struggling, wealth and prosperity are available to you. They are not the preserve of a few genetically blessed individuals, favoured by heaven and the angels; you do not need to have been born into the ‘lucky sperm’ club to achieve them. Wealth does not exist on the far side of a wall that the likes of you cannot scale. You can be rich. It is possible. I did it, many others have done it, and you can do it too.

Poverty is overrated. It is also optional. It all begins with the way you think …

  

Douglas Kruger is a business author and professional speaker. See him in action, or read his articles, at www.douglaskruger.co.za. Douglas’s books, including ‘Is Your Thinking Keeping You Poor? 50 Ways the Rich Think Differently,’ are available at Exclusive Books, Estoril, CNA, and as ebooks from Amazon.com.