Why Saving Money Should Be Prioritised Over Investing
Think of saving money as the fight that you must win.
Like going to battle and fighting at the front lines.
One of my favourite films of all time is Gladiator (with Russell Crowe aka Maximus).
Not only is it beautifully made, but it is also hugely symbolic.
In fact, I love this movie so much that I know every single piece of music in it by heart.
Thanks to the amazing work of Hans Zimmer and Lisa Gerrard.
Mary surprised me years back with a live performance of the entire album at the The Royal Albert Hall.
By far one of my best musical experiences as we watched the movie but had the orchestra play live.
If you fancy a listen to one of my favourites, check out Now We Are Free.
Music perfection!
You're probably thinking, what on earth does this have to do with saving money?!
Well, you see, having image anchors for important things in life can help you remember them when the time is right.
When I think of saving money and how hard it is, I have this image from the movie in mind:
Yup, it is this intense.
You see that shield he’s holding? That’s your budget!
That man in the not-so-friendly mask is the advertiser. He comes to take and that’s it.
You might remember I told you about him when I wrote about the need to fight the resistance.
The sly tiger represents all the crap things you can buy, which creep into your life but are quietly biting away at your bank balance.
These include all those things you might be paying for each month, which you can either seek alternatives or get rid of altogether. Think gym memberships when you can walk, run or cycle etc.
You see that audience? Those are your friends. Some of them want you to win, and others don’t. The former are a minority.
Know how you can tell which of them you should hang out with? Those with savings ofcourse! They aren’t ordinary. They’re extraordinary and I don’t say that to amuse you.
Look around the country and you’ll find that we are a nation of spenders.
We love everything we cast our eyes on and we want them NOW.
This same attitude has infected most of the West, and a lot of us are sleepwalking into danger ahead.
So, in order to save and win (which you must), you have to fight with intelligence and choose your weapons of war carefully.
Note that Maximus is fighting alone in this scene. Such is life too. All our journeys are individual, so don’t worry about comparing yourself with anyone.
Observe and learn, but don’t compare. Every facet of your life journey is unique to you and you only.
If you have a partner or spouse, then you must both become one and fight on the same team. Otherwise, all efforts will be futile.
Related post: How To Achieve Big Goals With Your Partner
So let’s zoom out make sense of what I’m really saying here.
Essentially, what I’m saying is that Your Savings = A Fight for Your Future.
It has to be that dramatic for the need to do whatever it takes to save, to start to sink in.
Below are other reasons why your savings should be prioritised over investing.
Milk First, Then Meat.
Saving money and investing money are very different things.
Both have different motivations and require different skill sets.
As a dad, I use the Milk and Meat analogy as it's probably the most memorable.
When we are born, we learn to drink milk. We grow up with that for a while before we even attempt eating meat (investing).
You can survive on milk alone but you'd need meat/solid food to grow.
In the same way, if you only focused on saving money alone, you could probably save enough one day to achieve Financial Independence or Early Retirement.
However, you need to ride the big wave of investing in order to speed up that pathway to freedom.
That wave represents money working for you through the beautiful power of compounding interest.
If you've never seen this at work, follow the link above to see how Ben and Lucy get on through their investing choices.
Without saving, you'll have nothing to invest. And investing goes beyond making money work for you.
It also includes the acts of generosity and putting your money to work in other people's lives.
Add to that, it includes the possibility of seeking and making a side hustle or business a reality simply because you have the dry powder to do so.
Create & Grow Wealth
Guess what makes you money? More money!
What I mean here is, if you want to see a significant bang from your buck, you want a lot of money at work.
Imagine you invest £1,000 and get a 10% return on that in a year, i.e. £100.
Think of how differently you'd look at that return if it was a return of 10% on £100,000 i.e. £10,000.
£10,000 has a lot more utility because it can change your life and mine literally. And there are quite a number of people out there making such returns.
Best is, that £10,000 can get reinvested automatically and making even more money, in addition to the original £100,000.
Starting to see why this could be game changing? Ofcourse, money can also move the other way, which is why I refer to investing as a skill set.
Money in the right environment (e.g. Broad based Index funds) can do well if specific risks are reduced to the minimum.
Related post: Investing Risks You Should Be Aware Of.
Get Tax Refunds
We all need to pay tax but we don't all love paying it.
The law allows you to get some of your money back if it's in the right environment.
Pick a private pension such as a Self Invested Pension Plan (SIPP) for example.
Did you know that for every £80 you put into it from your net income, you get back another £20 of tax you paid if you're a basic rate taxpayer?
You also get an additional £20 if you're a higher rate taxpayer.
So £80 saved into your private pension could also gain another £40 from tax rebates even before your money is invested.
This gets even more exciting if you have an employer that matches your contributions.
These are some of the hidden benefits of having a job.
Note though that investments into a pension can't be touched at least till you're 55!
An Individual Savings Account (ISA) offers you tax benefits when you invest your savings but also gives you the flexibility to touch your money.
Be Prepared No Matter What!
Saving money helps you prepare for that inevitable day of doom.
Some people are naturally cautious and don’t bother investing their money at all.
As bad as this might appear, there is also the comfort of knowing that the money is there and is under your control.
When you invest your money, you essentially hand over control to the markets. It can go up or go down, but should certainly not put you off at all.
My experience has shown me that getting my feet wet by investing is by far one of the best things I can do with money.
However, it isn’t done in excitement and without much due diligence and care.
Remember all that fighting to save the money? If one isn’t careful, bad investing could also lead to loss.
Hence the need to learn the skill of investing as time passes.
In the meantime, saving your money is a good as it gets.
It teaches you the discipline necessary to manage your own money, and only by doing that could you manage that of others e.g. through starting a business and having investors.
Related posts:
- My Philosophy On Saving Money
- How Much Money You Should Have Saved By Age
- 10 Reasons Why People Spend More Than They Earn
- How To Budget & Save On a Low Income
- 50+ Ways To Save Over £10,000 Every Year
What are your current struggles with saving money? Please comment below.
Do please share this post if you found it useful, and remember, in all things be thankful and Seek Joy.
Hi Ken, I read your story on the Mail Online and found your blog. It is really great! I am sure I will be a regular visitor. All the best to you and your lovely family, Wendy (New Zealand)
Hi Wendy,
Massive thanks! I appreciate you stopping by 🙂
The reason why we struggle with money so much is because people try and keep up with others. If we can’t afford a new car we go out and buy a new one on finance! It’s so easy to do. We then get the car and can’t really drive it as we can’t afford the petrol it needs, but that doesn’t matter as there’s a new car sitting on the drive that everyone can see. Taking a step back and living below your means is what we need to do, which of course will help to financial independence and help with mental health. We don’t want to live life worrying about money!
Hi Rachel,
You make really good points there. Keeping up with others is a big part of it, and is quite difficult to stop. The easy access to debt is HUGE! What do you think people can do practically to start living below their means?
The first most important thing is to have a budget. Each month write a budget before payday. The first time doing this review it and see where you could cut back! Do this every few months. It’s surprising when you see what you could actually cut out. Secondly, track your sending, keep all receipts for the month and look through them and see where you could have cut back. Thirdly, don’t been tempted by the lovely clothes you see in the shop window or the lastest mobile phone. Think to yourself do I need it? What for? Have I already got one. This will without doubt get you into the mindset of saving. Finally, don’t compare yourself to others. When you see that new car on the road and you really want one and wonder how they can buy one, 99% of the time it’s on finance and they pay a huge chunk out of their wages each month. Think to yourself I could save that money instead and later buy one that isn’t on finance. Also think does your current car get you from A to B? If yes then why would you buy a new car? It can be difficult to get into this mindset and can take up to 6 months but it’s worth it. In the end you will live a much happier and stress free life when it comes to money. Be in control of your finances don’t let them control you!
To add to this, I also would advise to always list food items needed (shopping list), before you go shopping and to stick to it. This ensures what you pick up is budgeted for and that there are no ‘surprises’ at the checkout!
Very good point.
Great point. You definitely need some ‘inner steel’ in order to stick to that list.
Hi Ken
I heard you on BBC Radio London.
Your comments were educational and informative
I look forward to reading more of your blogs.
Regards
Dawn
Hi Dawn
So glad to have you here. Thank you! Glad you found my interview helpful. It was my first ever radio interview 🙂
High cost of living a basic lifestyle not thinking of those taking annual holidays abroad or with latest gadgets but taking fuel, food, childcare, mortgages, clothes. The basics. Savings have gone down as due to inflation income has become worth less and less hence less money available to save.
Very good point. Inflation does make things difficult and I can see how this affects people saving. There needs to be a balance between income and the things we buy. Will that ever happen though?
Anna
For sure, inflation does play a role. More reason for us to be savvy shoppers and reduce food waste at home (by buying and cooking what we really need)
I hate to admit it, but with our £50 food budget, we’ve had terrible incidents of food waste. We’re getting better though.
Funny, for me it’s the other way around, born in a poor country with many relatives in the extended family, if you spend to show off, everyone will beg money off you or come and live in your house, so you actually try to look poorer, in the hope that they will leave you alone. It’s a dehabilitating cultural problem, because most people give up trying to improve themselves if they think the fruit any hard work will just be taken by others. Negative cultural practices can be as handicapping as limiting beliefs. I’m not advocating giving up though, you just have to raise your game and be smarter than the parasites and predators to improve.
Norfolk
Interesting cultural perspective. Someone wrote me a while back to tell me he had the same situation in a country in Africa.
What country are you from?
Zambia originally, but this is widespread in the region and I met a Cameroonian who said it was common (& regionally) there too, so I reckon it may be a pan-subsaharan phenomenon.
Like a lot of human behaviour, it evolved as an abuse of a good survival practice, whereby extended family effectively formed a private social security net with this, to raise the entire family in that the whole does better than the sum of the parts through the unity of the cooperative. If in your personal good times you share, but in the bad you can ask for help, as long as everyone follows the spirit of the philosophy, it can work well.
It can happen here too though, in rough areas in the UK it can be a very bad idea to have a nice car outside your house, you might as well put up an estate agent style sign saying ‘Rob me’. So I think ‘encouraged downplaying’ of wealth occurs in a lot of countries worldwide for this reason.
Love your blog! Excellent, practical advice we can all put into action!
Thanks, Emily!