Throughout young adulthood we’re told we need to save money, and the more we save, the more likely we are to be well off in the future. I think this is the wrong advice.
For some, just making a conscious effort to not deplete their bank account at the end of every money can be very helpful and is never a bad thing. I’m going to be talking about a different kind of person, the compulsive saver. The compulsive saver is someone who really wants to have more money and begins to forego every little luxury in their life, I’m not talking about the 10th t-shirt they buy every week, or the Ubers they get everyone; I’m talking about buying coffee’s out, buying lunch with friends etc. Small purchases which yes, add up, but overall (for me at least) the cost is worth the expense. The reason I believe these purchases are different is because they are generally spent with people socializing, and without them, can begin to seriously affect your life, unlike that 5mins saved by getting an Uber rather than a bus.
So saving money on small things which have an outsized effect on your quality of life isn’t good, it’s better to spend the money on them and be happier. But then you aren’t saving as much money and will never be rich?!
Well even if you saved all your money, lived on bare essentials with beans and rice for every meal, you can only save so much. You are limited by your income, with it being a classic trade of time for money (ie. typical work), which again, has a cap on it because there are only so many hours in the day. Saving money, and working for money both have caps on how much you can really earn. I believe the way to truly be able to break free from the limits of saving and working for money, acheiving financial independence is through a thing called passive income.
Passive income is as it sounds, it is earning money passively, without doing anything. This allows you to stop trading your time for money as the money comes in regardless of what you’re doing. It sounds too good to be true but there are many tried and trued ways of earning passive income; investing in stocks which pay you a dividend, making shirts on red-bubble, setting up a youtube channel where you videos generate ad revenue and even owning your own business (sometimes).
If you look at all über-rich people of the world, the Jeff Bezos’, Bill Gates’ and Kylie Kardashians’, they don’t trade their time for money, they could go away for a year and still earn money from their businesses and stock holdings. These are obviously extreme examples but they convey my point. Nobody gets rich by just working on a salary. Some may argue that yes, doctors, lawyers, investment bankers and whatever other professionals earn a lot of money and get rich, and yes, they do. Although they also have to work long hours and still trade their time for money so are limited exactly that same as you and me, just at a higher level.
Even if you don’t want to be uber-rich, I’m sure everyone wants a bit more time to spend on doing the things they love, rather than being at work. That is what developing sources of passive income can help generate, the freedom to be more in control of your time. So go out and buy a coffee every day if that’s what you like doing, just think about ways you can start to break free from your simple trade of time for money.
Harrison Hansford 