The world's wealthiest men and women are that way for a reason; they know things that us normal folk don't. One such secret: how to save money the right way. However, it's not as mystifying as some CPAs and financial consultants might have you believe. Let me give you a few pieces to the puzzle...
About Precious Metals
The world renowned investor and self admitted "gold bug" Doug Casey often says, "Gold is money, and sometimes it's also a good investment". One thing the world's wealthy do differently is to view precious metals as a form of money. In fact, they see it as "real" money... as opposed to the paper money we use in our daily lives.
As far as putting the idea in action, the wealthy don't keep un-invested savings in a bank account. They keep it in precious metals (gold, silver, platinum, etc.) and other inflation fighting vehicles.
What's the reasoning behind this? First, as I mentioned, precious metals are money. They can be stored or used to make purchases. But the real benefit comes into play when we talk about inflation. Without getting into the mechanics, I'll simply state that every year the dollar is worth less. This is why our grandparents could buy a bottle of soda for a quarter and we have to drop $1.00.
With that in mind, it's easy to understand how a savings account of $50,000 loses actual purchasing power every year. But a deposit box with $50,000 worth of gold bullion will hold the same relative value regardless of the state of the Dollar (or Euro, Ruble, Yen, etc.).
It's worth noting that gold is currently trading at over $1,000 an ounce, and has reached record highs in recent months. A big reason for this is the volatility surrounding the U.S. Dollar as I write this. Those "in the know" are locking in their savings long before inflation rears its ugly head.
Automatic Personal Finance Plan
Tim Ferriss, of 4 hour work week fame, has said that the key to saving cash is to make it as automated as possible. Everything, from making money to saving money to investing money is usually an automated process of the world's wealthy.
And it all starts with you. The more daily decisions you have to make around money, the harder it is to actually save. The less decisions, the easier it gets. Eventually, it gets to the point where your savings account is growing faster Is it any wonder that it almost feels like free money for bills?
Ramit Sethi, a guest poster on the Tim Ferriss blog, lays out a bulletproof personal finance plan that looks something like this:
* Use automatic billing for recurring payments such as credit cards, utilities and subscriptions
* Set up a separate savings account which is split into specific sales goals (house, retirement, etc.). Have your checking account automatically feed this account.
* Set up a third account specifically for discretionary spending. This is for things like eating out and going the movies. Again,this should be fed automatically from your checking account at a specified percentage of your check. Once it's empty for the month... that's it!
These two techniques are just a start, of course. However, using these tips alone will put you miles ahead of the average... and start you on the road to joining that illustrious group: the world's most wealthy people.
