The Power Of Saving

    Building Your Ideal Future

    One of the most common questions I’m asked by others is how to get started investing in Real estate.  While there are many different ways someone can get in the game, the easiest, safest (and in my opinion the best) is to save enough money for a down payment and use it to buy an income producing property.

    Simple right? You bet. So why don’t more people do it? Most likely they don’t realize how saving small amounts of money consistently over long periods of time can really add up.  When it comes to saving, the best time to start is yesterday.  If a college freshman gets a job at a restaurant and is able to save $300 a week by living at home, renting a room to keep rent low, not buying a new car, etc., at the end of 4 years that freshman will have $62,400 in the bank when they graduate. Talk about getting a jump-start on your future.

    Have you ever had $62,400 in your bank account at one time? Kind of amazing to think about the fact this is a realistic goal for a college grad who went to a reasonably priced college and lived a semi frugal lifestyle.  For those of us who went to college, we know just how fast those years flew by.  For those that didn’t, everyone can still attest to the fact that 4 years seems like a long time when looking ahead, but the last 4 years have passed faster than most of us realized.  The point is, time is going to pass. You can use that time to prepare for the future, or you can lose that time waiting for the future to arrive before you start to act.

    But what is $62,400 worth? Well when you consider that a college grad has 40-60 years in front of them to let it grow, it may be worth more than you’d think.

    Putting Your Money To Work

    Lets say that college grad gets a job and buys a duplex for themselves to live in and another duplex to rent out. Each duplex is purchased for $156,000. The duplexes rent for $800 a side each. Now lets assume that after paying for the mortgage, property taxes, insurance, and maintenance fees, the 3 units rented out pay for the total costs and the grad is able to live rent free in the remaining unit. Guess who is able to keep saving money each month? By saving $800 a month in rent, plus the $1200 a month they were able to save before (should be no problem with their new higher paying post-graduate job), they are now saving $2000 a month.  That is $24,000 a year. Lets say for the purpose of this example our graduate never gets another raise and is never able to save any more than this.  With that $24,000 a year, this person could conceivably purchase a new duplex a year every year for the next 40 years.  That’s a lot of duplexes.  When considering rising rents, rising home values, and loan pay down, you can easily see how that original $64,000 has been turned into 42 duplexes and a rental portfolio that should generate more than enough money to carry our grad into a robust retirement.

    And this is the power of saving.  It’s not just the money you’re saving right now, it’s the effects of that money compounded again and again over the course of 40 years.  That’s powerful. Once we really grasp this concept, saving becomes so much easier.  When it becomes easier, it becomes a habit. When it becomes a habit, it can change the course of your life.  When it comes to saving, there is no better time to start than yesterday.

    The fact is, the majority of us will spend a lifetime laboring for someone else, earning money to support ourselves.  When you look at the big picture of 30-50 years of working, a LOT of money is going to pass through our hands.  It is up to us how much of that money we keep, and how much we give away to others.  When you realize how fast your money can grow when you put it to work for you, you’ll find your priorities often shift and things you once considered “must have” now don’t seem to be so.  Take time to learn about how to make your wealth grow, and it will take care of you when you reach retirement.

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    1. This is a very good article! It’s better to save your money so that you can change your circumstances. This is a powerful idea! Thanks.

    2. Definitely puts things into perspective! Little frivolous expenses add up quickly and saving money is the way to go if you want to start investing. Also, it really is much more stressful to live month to month, stressed out and wondering if you will have enough money to make it until the next payday versus taking the time to manage your money and cut out/reduce costs that are not really necessary. I really like the examples you had in the section of putting your money to work-really made me think about the long term advantages. Thank you for the article!!

      • Great to hear that Kalyanii! If you’d ever like to share some of your big hurdles with this, I’d love to see if I can help you out/encourage you to stay focused on saving. It makes a huge difference in your future!

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