Saving Makes Money, It’s About How Much You Keep

Saving Makes MoneyIt’s never about how much you make but how much you keep. There’s been a plethora of instances where lottery winners, professional sports players, and celebrities who’ve earned an obscene amount of money have gone bankrupt and broke. I’m not talking about lottery winners with a 6 figure winnings, I’m talking about people who’ve won/made 7 – 8 figures worth of money. How do they go bankrupt?!

Saving Makes Money, Not Salary

I earn 5 figures a year from my job. It’s hard for me to look for ways to spend my after-tax money because I’m content with just buying stuff that is necessary. Yet when I hear of stories of people getting/making millions of dollars and they go broke, It makes me want to question where their money ended up.

This highlights an important distinction between salary and net worth. In college, my friends were obsessed about people’s salary and internship offers (which I most of the times avoided answering). Then when a comparison happened, the one who made more would always feel superior or feel like they are doing better in life, are smarter, or any other thing that makes them feel like they are better. 

While it’s all well and good to talk about salary, they never understood that the one who makes more is not that one who keeps more. None of my friends would ever ask what someone’s net income is, but only salary. This I think brought a common misconception that salary is the most important thing when it comes to personal finance. 

Allocate Funds that Give the Highest Utility

This is the goal

I don’t get a lot of joy from buying material things. My budget covers everything I need to live plus a miscellaneous budget to go out plus a hefty savings amount. I don’t understand how people spend money like there’s no tomorrow because there will be a tomorrow. 

Larry Ellison famously said “at some point, you can’t spend all of it. Trust me, I’ve tried” during a graduation speech. Granted, he spent a lot of money on things that he doesn’t need, in my opinion, such as multiple cars, airplanes, and an island called Lanai. Even after spending an obscene amount of money on things he doesn’t need, he admits that he can’t spend all of it. 

Finding things that add joy to your life over the long-term is hard. This is why I have a hard time finding ways to spend money because I’m very selective on the things that I purchase. Most of the times, I have to be more than convinced that my purchase will add value over the long-term.

Of course, that’s not to say I don’t buy things that provide a short-term utility. But the important thing is that I am conscious in recognizing that when I’m making a purchasing decision. 

Spending money on things that add little or temporary utility to your life is easy. Going out to bars, eating out, buying the newest carleaving the lights on while out, etc. are all examples. America brilliantly markets the idea that material possession is the best way of living. This probably pumped up the economy and made money flow through the economy more.

Countries in Asia’s average savings rate can be as high as 33%+. in America, it is seen as “good” if savings rate is 10% or so. The difference, in my opinion, is probably in the marketing to consumers.

What’s Normal to You?

It’s about training yourself to the point where saving money becomes the norm and instead of spending becoming the norm. I’ve consistently saved to the point where I feel out of place if I don’t save. My friends see me as out of place since I save so much but the important thing is that I feel normal to myself, not to others. 

If you want to better your financial life, figure out a plan on where you want to be 1 year from now. One thing to remember is that sitting down and taking the time trying to come up with a plan is going to take time. Maybe a few hours depending on your situation and how thorough you want your plan to be.

Then give yourself a month to follow it. Maybe you’ll stick with it 5, 10, 15, 25, 30 days out of the month. This is not failing even though you’ve only completed 5 days out of 30 days. 5 is still far better than 0 and that’s how you should look at it. Then the next month, complete it 6, 7, 10, or any other number higher than 5 days and you will be on your way to create a habit out of it.

Readers, do you focus more on how much you make and how much you keep? Do you know anyone who makes a lot but misuses the money a lot? Let me know in the comments below!




Finance Solver

I grew my net worth to $40,000 as a college student through hard work, discipline, and a little bit of luck. I graduated college in 2016 and will be starting to plan for my retirement once I start working.I am planning on reaching financial independence by my early 30's and I will document my moments of inspiration all the way to desperation here.

My goal is to enable your success in personal finance so that you can realize the American dream. The first step is starting today!

Read more about me here.

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26 thoughts on “Saving Makes Money, It’s About How Much You Keep

  1. “My friends see me as out of place since I save so much but the important thing is that I feel normal to myself, not to others.”

    This is a very important point. We should not be dragged along with the normal way of keeping ourselves in consumer debt.

    Thanks for sharing 🙂

    • Finance Solver says:

      I agree! I feel that in college years, there’s a lot of “pleasing others” phase (at least there was for me) which can be a dangerous hole to get out of. I didn’t like saying no to a lot of things but saying no is such an important skill!

  2. It is crazy to me how many “rich” people get into money trouble. I often wonder about celebrities that buy million+ dollar homes. Do they pay cash or finance because they can? What happens when they run into cash flow problems? Nothing is guaranteed.

    My husband and I are very balanced with focusing on making more + being more careful how we spend. However, still enjoying life in the process as I have commented before. Thanks for sharing! 🙂

    • Finance Solver says:

      Yes! They could be thinking “well I have a lot of money, and since I financed it with debt that means I have more access to money so let’s spend more!”
      I do remember that, it’s great when you get to keep the same level of enjoyment while lowering costs. One of the rare situations where there is no downside!

  3. A penny saved is a penny earned! I’ve lived that philosophy since college. Although I’ve never been a super high earner, I’ve managed to build my net worth pretty quickly by prudent spending habits. It’s pretty much ingrained in my blood at this point. Good post, thanks!

    • Finance Solver says:

      Your net worth has exploded very nicely! I don’t think I’ll be a really high earner either, just going to try my best to increase my income but not expecting a whole lot. My company does pay me extra for staying healthy and I’m taking advantage of that as much as I can to make some extra money. Thanks for stopping by and commenting!

  4. Reminds me of the story of Mike Tyson who made over 400M$ in his career but ended up bankrupt before he turned 40.
    Making tons of money is nice, but not knowing how to spend it makes is equally important.
    As you rightly point out, the savings rate in the US is low (currently 5% average), so you’ll be doing MUCH better than most americans if you can increase that to higher rates!
    I’ve personally tried to maintain a 50% yearly savings rate, it has now become second nature. I now feel bad if I need to spend more than usual!

    • Finance Solver says:

      I had no idea that he declared bankruptcy before hitting 40. Another story to learn from! If I make $400M I would totally put it all on black! Just kidding, putting it in the s&p 500 would be cool too.

      Yep, it’s a simple number to change that makes a huge difference in the end. I also try to have a ~50% savings rate! Right now it’s at 55% and looking for ways to increase that number.

  5. We make every dollar work as hard as we can, making sure we get good value for everything we do.

    I see most of society live up to their financial potential as a lot of people earn a lot more than I (currently) do, yet their net worth trajectory is not where it should be.

    Society promotes the image of how much people have (or even worse, how much they appear to have) instead of creating good habits of saving, investing and trying to become financially independent.


    • Finance Solver says:

      Yeah! Outsourcing the work to dollars while you sit back and collect dividends, sounds like the life 🙂
      I’ve always wondered how people who make six figures aren’t millionaires even after 20 years of working. The social effect and the social pressure must be enormous!

  6. Yes, I would whole-heartedly agree that successful financial status should be determined on net worth/savings instead of the common how much one earns per year! Since my family has started making savings a priority and lived on what’s left, our net worth has exploded and we are finding ourselves with new opportunities all the time!

    Thanks for sharing this great commentary!

    • Finance Solver says:

      Fantastic! I love how savings is so tangible. I can clearly see how much my work has paid off because as the green swan said above, a dollar saved is a dollar earned. Let the net worth explosion continue on!

      No problem, thanks for stopping by!

  7. My mom always said this: “It doesn’t matter how much you make; it’s how much you spend.” If you spend everything you make, you won’t have anything left over!

    That is so true, and you see it everywhere. Earning a lot of money won’t help you become rich if you don’t save any of it.

    • Finance Solver says:

      Ah I haven’t heard that before, that’s a great mom teaching great principles! And it could even be worse, taking on debt to pay for stuff! *gasp*

    • Finance Solver says:

      Fantastic! I see infinite upside in making more money but sometimes it’s hard to make more money because it could be based on external factors (customers might not want the side hustle, it’s hard to find side hustle opportunities, etc). Saving is the only thing that can be controlled so why not control it, right?

  8. Ahhh I can totally relate to this. I was ‘that’ person for so long. I always though I needed to earn more to be able to save, truth was the more I earned the more I spent, and I was still at square one! Until I changed my mindset and started to save before I spent I had nothing to fall back on. I have managed to save almost £4000 from a salary I swore wasn’t large enough just 8 months ago! Great post!

    • Finance Solver says:

      It’s never too late to start saving for retirement, that’s the beautiful nature of it! Plus I’m on the “life is long” camp so I think we can make a ton of mistakes before we find out the right course of action to take that works for us. That’s fantastic, growing that savings!

  9. Absolutely! You’re right no one ever asks you how much do you save, just how much do you make. Irrelevant if you don’t save any of your salary. I’m doing a good job of saving right now (~33% after taxes depending on the month) but I know I can do better.

    • Finance Solver says:

      33% of after tax money going into savings is a great number, nice! Little by little, getting a little better at it is going to steer you in the right direction. An ounce of savings does better than a pound of earnings!

  10. I will never discuss salary with anyone anymore. As much as people claim it doesn’t affect their judgment/feelings, you can’t know for sure. Myself included. You can be happy as hell for your friend who just got promoted above you, but some negative thoughts can still creep up in the back of your mind.

    I can understand the people who make millions and still go broke, particularly athletes or celebrities. They don’t just stay at home playing video games like me…and there’s lots of temptations out there. Celebrities may also need to maintain high lifestyles to remain relevant, and their personalities are also not the type to really care about finances.
    I’ve noticed many polls where people focused on financial independence are heavily weighted in the “Introverted” and “Thinking” categories rather than the “Extrovert” or “Sensing/Feeling”.

    Personally, I’ve shifted my efforts towards increasing income rather than my savings rate. I used to be a pretty extreme saver, but it’s all a balance to me. Saving is fundamental, no doubt about it but it’s limited, while income is not. In one of your comments you say you don’t think you’ll be a high earner, but truthfully you probably have no idea what’ll happen! 🙂

    • Finance Solver says:

      I agree, I always practice the “no matter what’s going on in my life, if something good happens to you, I will congratulate you without fail” but it’s not how everyone thinks.

      That’s a really interesting point. I never thought that introverted individuals can be better at extroverts in saving but I can see that the different personalities can be geared towards saving or spending.

      Yep, endless opportunities to earn! I like to focus on what I can control first before I delve into what I can’t control. I do not know what will happen so I’m not going to be dependent on me earning a high income! I’m going to try to be a higher earner than I am today but I know that it can’t happen with 100% probability. If I ever do, I will let everyone know in this blog, of course!

  11. Fantastic article and you’re absolutely right! Net worth is much more valuable than income. Or, even more important (which you essentially alluded to) is the ability to live on your savings without them dwindling.

    I like to refer to being “rich” as having a lot of money and being “wealthy” as having enough to cover your expenses without working — based on your standard of living. Therefore, if you’re earning $50k/year from investments and happy living on less than that, you’re wealthier than someone making $1 M a year but struggling to make their house payment.

    • Finance Solver says:

      Yep! The key to staying financially healthy and getting better is to make sure that income is greater than expenses. It’s the only way that you can retire with minimal work.

      That’s a great definition that I haven’t heard of before! I don’t care when people judge me for making less than them. I can bet a lot of money that I have more cash and cash equivalents than them, which is what matters in the end. If expenses can’t be covered, no use in making a lot of money anyways! I saw on some P2P platforms that CEOs were on there looking for loans (and they were making multiple 6 figure income). That’s mind boggling!

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