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Saving Money Is For Suckers: Why All Of The Advice You’ve Ever Gotten About Money Is Wrong

Stop saving your money.  I know this sounds crazy and you can already hear your Dad’s voice in the back of your head telling you how ludicrous this sounds.  But saving money is not the smartest thing you can do.  Saving money is only part of the equation and Modern Military Men should want it all.  Read on to understand a little bit about inflation and why it means all of the advice you’ve ever gotten about money is wrong.

Your Money Is Worth Less Every Single Day

Not many people fully understand what inflation is and how it works.  There are a lot of factors involved and I’m sure some old Economics professor would love to give you a riveting lecture about it.  To me that sounds about as much fun as waking up to another morning of basic training.  So instead I understand inflation well enough to know how it affects my life and my finances.  The big take away is inflation means the cost of goods and services is rising.   As in the cost of a Whataburger in 5 years will be more than the cost of one today.

Well wait a minute, how is it possible that everything is getting more expensive?  If that were the case, eventually I wouldn’t be able to afford anything!

The catch is that in a country like the good ol’ US of A, the wages, for the most part, keep up with prices as they inflate.  So although that Whataburger is going to cost more down the road everyone should be making more money as well.  This is one of the reasons why minimum wage creeps up every few years and military salaries are increased.

So then why should I care?  As long as my wages go up what does it matter if things cost more?   The answer is because you have to think about your money sitting in the bank.

Some people are big spenders and others are big savers.  Some of us like to blow our paycheck the second it lands in our checking account and others immediately move it into savings.   Obviously, people that live paycheck to paycheck are not being wise with their money and should really cut back on their expenses.  The savings folks are a little bit smarter than them, and feel comfort and security knowing they have some cushion for a rainy day.  Most people belong to this category since it has been ingrained in our heads since we were young by both our parents and Lil Scrappy alike that smart people save money.

While saving money is much smarter than blowing all of it, I want to offer an example of why it is not always the best choice.

Just imagine you were able to save up $100,000.  Literally you have $100,000 sitting in your bank account.  Feels pretty good right?  Lets say you keep that $100,000 dollars in your account for a year.  How about 5 years?  What about 50?  Think about it like this, since the price of goods has gone up year after year and your $100,000 has stayed $100,000 (interest paid on bank savings accounts is almost negligible these days) that $100,000 is able to buy you less and less.  In fact, assuming an average rate of inflation of 3% annually,  your $100,000 in 50 years will be able to buy the equivalent of about $23,000 in today’s money.  Your money will have lost 77% of its value by you being “responsible” and just saving.

So If Spending All of My Money Is Foolish, and Saving Money Is Just Wasting It What Should I Do?

The answer is to have your money work for you.  Step one is to save up some money for an emergency or that rainy day.  Easily accessible money in the bank is something you forget about when you don’t need it but you’re very thankful for when that unexpected emergency or bill pops up.  Most financial advisors recommend saving up and keeping between 3-6 months worth of expenses in the bank.  So if you have a mortgage, a car payment, and a credit card payment every month totaling $2000 you should keep between $6000-$12,000 in the bank.  Though as members of the military we have some serious job security and the guarantee of a paycheck every month, you never know what is going to happen in life.  Once you have built up this cushion it’s time start having your money work for you.

Invest!

There are plenty of investment options out there that will not only preserve your net worth but grow it.  The common ones everyone always talks about are stocks and real estate.  Each one has its own advantages and disadvantages and you need to do your research to figure out which is right for you.

The easiest and simplest investment that all Military Men should know about are the TSP and IRA’s.  Check out Brian Shumway’s article on the TSP or my post on investing in an IRA.

Just remember the smart man saves his money, the smart rich man invests his money.

How Much Money Do You Think Is Enough Money To Keep In A Savings Account?

Alexander Lawrence

Alexander Lawrence

Alexander is Founder and Editor-In-Chief of The Modern Military Man. He's active duty Air Force and gets paid to think he's really cool and fly around really fast. When he's not in the air he enjoys planning how he's going to make his millions and where in the world he wants to visit next. His current idols are Don Draper, Robin Olds, and A$AP Rocky.

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2 Comments

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