Saving Every Penny? You’re Doing It Wrong

Two people save $1,000 a month. One ends up broke, the other ends up a millionaire. The difference? One of them understands a simple truth that most people never figure out. Saving alone is not enough. If you've been trying to save more money, cutting back on Starbucks, obsessing over budgeting apps, but you still feel like you're stuck. You're not alone. In fact, most people make this mistake. But today, I'm going to show you exactly how to fix it. I'll break down the five steps to building real wealth. And by the end of this video, you'll know how to make your money work for you, instead of you working for your money. Step one. Saving isn't going to save you. Let's talk about the biggest myth in personal finance. I just need to save more. This is what we've all been told since we were kids. And save your money. Don't waste it. Be responsible. It sounds great, right? But here's the truth. If you save $1,000 a month for 30 years in a bank account, you will have $383,000. What happens when you factor in inflation, taxes and rising costs? That money is not even close to enough for retirement. Now let's take that same thousand dollars a month and instead invest it in in the stock market, which historically has earned 7% per year. After inflation boom, you now have about $1.2 million. This is the difference between struggling to retire at 65 versus becoming a millionaire before 50. Guys. Saving alone is not enough. If you want to build real wealth, you have to invest. Step two. You think your money is safe. Inflation is robbing you daily. Here's a brutal reality. Every dollar in your savings account is worth less every year. In 2024, inflation was 2.9%, which doesn't sound like much, but let me show you what it actually means for your money. Alright, let's say that you have a typical savings account like the one your parents have at their grocery store, that Wells Fargo account they've had since 1983. Most savings accounts like that offer a pathetic 0.41% interest. So while your bank is basically saying inflation is quietly eating away at your purchasing power, let me put that in perspective. If you have $100,000 sitting in a savings account just for easy math, your bank might give you a whopping $410 in interest for the entire year. But when you factor in inflation, inflation erased $2900 of your money's worth real value. In other words, your bank is giving you $34 a month. But inflation is taking away $240 that same month. Like someone giving you a dollar and then immediately taking $7 from your wallet every single month. And yet people feel a source of pride from keeping their money safe in savings. Safe from what? Safe from growing? Safe from building wealth. There's this misguided belief in America that I just need to save money. And so people will obsess and agonize and berate themselves over not saving enough or ooh, I'm so good, I'm morally virtuous. I saved $53 this month. They're playing the entire wrong game. In order to build real wealth, you have to go way beyond saving and you have to invest. Saving alone will not build real wealth, but investing is where that is created. Before we jump into investing, I want to clear up a common misconception, that which is that you need a money guy to invest. Ramit I don't know anything about investing. Don't I need my uncle's old fraternity brother at Edward Jones to tell me what to do with my money? No. Most financial advisors charge a percentage of your portfolio, usually 1%. 1% doesn't sound like a lot, but over the course of your life that adds up to over 25% of your returns paid in fees. That means hundreds of thousands of dollars will go into their pocket as fees. Now, there are situations where working with a professional can be helpful. For example, if you are nearing retirement, if you have a large portfolio, if you just had a huge bump in income or net worth, like maybe a big raise or your company went through an IPO and you need someone to help you plan specifically and properly. If that sounds like you, getting help from a financial planner can be helpful. In fact, I've done it myself, but only if they offer their services for a flat rate fee like our friends at Facet. Facet gives you flexible access to a team of financial planners, CFP professionals, and a team of professionals providing guidance across retirement planning, tax strategy, estate planning and more. And Facet charges an affordable flat membership fee, never a percentage of your assets, so you can get the advice and support you need without spending hundreds of thousands of dollars over your lifetime on fees. If you want a professional opinion on your finances, check them out@facet.com ramit and set up a free call and see if they are right for you. Head to facet.com ramit or click the link below to learn more about which membership option is best for you. Now let's get to step three. A simple strategy that creates Millionaires numbers don't lie. Most millionaires do not get wealthy by saving or winning the lottery or inheriting a fortune. Check out these stats. 79% of millionaires in the US are self made, meaning they did not receive any inheritance. 75% of millionaires say that they built their wealth through regular consistent investing over a long period of time. Please stop listening to what you see on Instagram. Oh, I made a bunch of money in crypto overnight. I'm f cking rich. Most wealthy people are older because most wealthy people have gone the long term, slow, simple investing route. Now, I know if you're thinking, okay, I need to invest, but how do I actually start? I'll show you. Here are the three easiest ways to start investing today, even if you have zero experience. Number 1, 401k match. If your employer offers a 401k match, you are literally leaving free money on the table. If you don't take it. This is the best return on investments you will ever get. Just email your HR person and see if they offer a 401k match. Number two, your Roth IRA. This is one of the most powerful investing accounts available because the money you put in it grows tax free. That means when you take it out, you keep 100% of the profits. You can open up a Roth IRA at Fidelity, Schwab or Vanguard today. And number three, target date funds. I love these investment options. Once you put money into your retirement accounts, you actually have to buy investments. Otherwise it's just sitting there. But individual investors really should not be picking individual stocks. One great option is a low cost target date fund that will do all the work for you. Now by simply setting up these two accounts and investing your money in target date funds, you will be light years ahead of 99% of people. Step 4 Build wealth on autopilot. Now here's the real secret of wealthy people. They don't manually invest every month. You think they're sitting around, oh, what's my login and password for my investment account? Is it Tuesday or Wednesday? When am I supposed to. They don't do that. They set their investments up and it grows automatically. So you can do exactly the same thing. Log into your accounts, set up automatic transfers to go from your PayCheck to your 401k and from your checking account to your Roth IRA. Once that money is being transferred, 10% of your salary is a good number. Turn on automatic investments to go into something like a target date fund and then forget about it. That's it. One decision you make today can make you a millionaire in the future. Step five, focus on making more money, not just cutting costs. Are you tired of hearing people tell you to stop spending money on coffee? Oh, hey, everybody. Save $3 a day, $5 a day. And then when you're 990 years old, you can afford to buy a pair of jeans. What the. Guys, you're wasting your time playing small. I don't care how many budgeting spreadsheets you have, how many little tabs you have. Oh, I use copilot. So cool. The maximum you can cut your expenses is what, 20%, 30%. Okay, but your income, you can grow that by 50%, 100%, even 250% if you focus on the right things. So instead of obsessing over $4 coffees, why don't you just focus on these three things that will actually build real wealth. Number one, negotiate your salary. You don't even try. But a simple 10 minute conversation can get you an extra five to $10,000 a year. Number two, start a side business. You don't need to quit your job. Make an extra thousand dollars a month doing something you're already good at. Number three, build more skills that pay more. Learn high value skills. Sales, marketing, management. This increases your earning power for life. If you focus on earning more, you will give yourself a massive advantage in building your rich life. So now you know the truth. Saving alone is not enough. If you want real wealth, you absolutely must invest. You have to automate your money and you should focus on increasing your income. But this is just a start. The next step is learning how to make more money. And I show you exactly how in my next video. Click to watch it now.