Saving

When I talk about a certain topic repeatedly with different people I start feeling like I should turn it into a blog post. This is one of those topics.

I think these topics deserve to be written because they often involve references to books I’ve read or videos I’ve seen and I kind of want to give that context to the person. Additionally, sometimes I get the impression that I could have got my point across more clearly if I would have written it or that these topics aren’t talked enough.

In the past (i.e. Once Upon a Time), I was very bad at saving money. Even though I didn’t spend my money buying stuff (I don’t like owning things), usually I spent most of it traveling. Even though I did not have debt, I lived mostly from paycheck to paycheck. To be honest I did not have a clue about where I was spending my money until earlier this year I started using YNAB to track my expenses. YNAB is a bit pricey but by using it I gained an awareness of the kind of expenses I have and made a significant shift in my priorities money wise.

I never saw the point in saving money because I did not have a goal of what I wanted to achieve with it. Currently, my goal with saving is to build wealth.
I want to build wealth so I can have a comfortable retirement. One day I am going to have to stop working and when that day comes I want to have a way to support myself. To be honest I am also not very confident in the ability of modern economies to fund social security due to demographic changes.
I want to build wealth so I can have some financial independance from any employer. An employer might go out of business, an employer might fire you, you might get ill or you might need to change jobs. Like an investor diversifies stocks, one should diversify sources of incomes against unexpected events.

The whole point of this post was to share some of the things I’ve read along the way that have helped frame why I save, how much I save, and where do I put the money I save. I think they might be useful to you too.

Mr. Money Mustache (MMM) believes that saving more than you earn is the only way to get rich and if you save 50% of what you earn and you invest it, you can retire after working for 17 years. The writing style might make you cringe at times. But the essence of it is very good. Some of the things he wrote and I liked are:

If you start saving money (you should). You should probably be investing it (and have low cost index funds as part of your portfolio).
YNAB, the expenses tracking app I use, has a very good e-mail course on investing (PDF version). It covers the basics of investing very well.

After the YNAB course, I suggest you read the Random Walk Down Wall Street which provides a very thorough and insightful overview of investing. The book is among the best books I’ve read this year and provides context to a lot of things that are presented in MMM’s blog and YNAB’s course.

I really liked reading Wealthfront’s methodology white paper (they also have a nice blog). Dr. Burton Makiel, which wrote "Random Walk Down Wall Street" works at Wealthfront therefore, I see a lot of content as an extension of what I read in the book.

Matt Cutts’ investing tips also contain some nice advice. And William Bernstein also wrote a great small booklet on investing and saving.

If you can understand Portuguese I’d also recommend the book “Como salvar a minha reforma”. It gives a very nice overview of the state of Portugal’s social security and warns against buying most PPRs.

Anyhow, all the advice above boils dow to: Start saving early and save regularly. Live modestly and don’t touch the money that has been put aside. Invest your money and keep your investment strategy simple.

These resources were helpful to me. I hope they are helpful to you too. If you know of any resources on the topic that were helpful to you. Please forward them to me.