Why It Makes Sense to Be an Elite Saver (And Investor)

I just wrote a A Simple Guide to Financial Freedom based on my experiences with Financial Freedom. Consider giving it a read if you are interested in this topic.

In my book, Elite Saver status is achieved by having a savings rate of a least 50%. Probably more like 66%.¹ That means you save $2 out of every $3 you earn. This may sound like an insane amount. But once you have trained a bit you’ll see it is possible. And the benefits are immense.

Here are a few reasons why you should aspire to be an Elite Saver.

The best things in life are free (or very cheap)

Spending time with friends and family, reading, walking, nature, eating healthy, music, learning, running, coding, writing, … I could go on. These are some of the things I enjoy most in life — and they all have something in common: they don’t cost much money.

Spending an early Sunday morning writing or reading doesn’t cost a thing. Walking or running in a nearby forest is free. Thanks to technology and the internet I can learn almost anything about any topic — for free. And if I want I can even build new things using just my keyboard.

I do enjoy some expensive things, like travel. But all of the cheap things listed above are way more important to me. And even when it comes to travel, what I really enjoy isn’t the expensive parts — the good hotels, luxury apartments, and expensive food. What I enjoy is experiencing a different place. And that doesn’t have to be super expensive.

When you decide to spend less and invest more, you also gain more time to do these free, amazing things. You don’t spend time shopping online or driving to an expensive restaurant. Instead you force yourself to spend time on the things that often turn out the be the ones that really matter.

Compounding

We humans are very bad at understanding compounding. You know what a compounding graph looks like — the exponential curve going flat until it suddenly becomes a rocket. We think we understand but we really don’t. Compounding is more powerful than many appreciate.

One way to grabble with compounding is with the Rule of 72:

The Rule of 72 is a heuristic used to estimate how long an investment or savings will double in value if there is compound interest (or compounding returns). The rule states that the number of years it will take to double is 72 divided by the interest rate. If the interest rate is 5% with compounding, it would take around 14 years and five months to double.

Compounding

Whatever you are investing now will double every 14 years and five months, assuming a 5% interest rate. Assuming 10% your money will double in just 7,2 years.²

If you invest $1000 now that will become $2000. Then $4000. Then $8000(!!). Then $16000(!!!).

Three cycles of doubling and you go from $1000 to $8000. Imagine your current savings times eight. Now imagine what it could be if you were an Elite Saver. My bet is you are thinking about a pretty large number right now. That’s compounding.

If you start saving early you should be able to get at least three cycles. Likely more. Start early and start aggressively. That’s how you impress the compounding gods.

Investing in productive assets just works

The history of the stock market is a graph going up and up over time. Lost of volatility in the short term. But over a long enough period, the trend is clear — the stock market is a place of wealth creation.

You can lose a lot of money, as a lot of people have, but you can also build immense wealth by investing in the world’s best companies.

The more you save, the more ammo you have to put into productive investments. You have a lot of money that can be put to work for you. And that in turn fuels the compounding magic we just looked at above.

Investing can sometimes seem scary or complicated. And today’s financial world has lots of tools, options, services, opinions, etc., that can make it all seem like you need a PhD just to get started. But at the core, it is about putting your money to work for you so they generate income. You can buy a house and rent it out. Or you can own part of a company (via stocks) and receive dividends. Or you can loan out your money and collect interest. There a lots of options and when you save a lot you get to take advantage of them.

The best thing money buys is freedom

Once you have your basic needs taken care of, money is best spent acquiring freedom. The ultimate goal for an Elite Saver is financial independence — a state where you are free to do whatever you want, whenever you want. That’s a goal worth working towards. And most people do. Sadly, they work very slowly towards this goal, spending the majority of their life trying to get there.

As an Elite Saver you can get to financial independence in less than 10 years. But your saved income will have a positive effect much earlier than that. Once you are no longer living paycheck to paycheck (or close to it), you’ll be freed from many financial anxieties — like losing your job or having an big unexpected expense.

You’ll know that you have enough financial stability to handle bumps along the way — and you have a long runway if your income suddenly disappears for a while.

Saving a lot means you have to learn to live with less. This toughens you. It makes you more resilient. Once you know you can live with less you will no longer fear losing what you have. This is an important lesson if you want to live a life free of worry.

Being an Elite Saver brings you freedom much earlier than full financial independence and retirement. It gives you the freedom to quit a job you don’t like. Or the freedom to prioritize life over work as you know getting fired isn’t the end of the world for you. It gives you the freedom to take months (or even years) off at a time.

I still consider it early days in my own financial journey. But I already have enough runway that I could spend 3 months traveling New Zealand last year. And this year I spend almost a month in the Alps thanks to my savings.

Become an Elite Saver today

That was a few reasons why saving rather than spending should be your goal. There are more but that will be for another post. Instead I want to leave you with a call to action.

Most people never become Elite Savers. They save somewhere around nothing to 20% of their income and because of this they work their entire lives building up little wealth. This is a sad state of affairs. Especially once you know there are other options. As an Elite Saver you can decide to cut your working life to just 10 years. Or you can continue working and building up even more wealth. You can work reduced hours or find a job you really enjoy but pays less.

Your options are wide open once you are elite. And getting there is simpler than you may think.

Cut your expenses today. Start investing. Read this to get started in less than two hours. Change your relationship with money. Become elite.