It's Not What You Earn, It's What You Save

Is it true that it's what you save that matters? I believe so. I know several persons that make a lot of money, but are literally living paycheck to paycheck. On top of that they have no security basket or retirement basket to speak of.

I also know individuals that make less than $40K per year, yet are building quite a nest egg for themselves.

What's the difference? Debt has a lot to do with it. Where debt is involved, it is difficult to pay that down and build any sort of savings.

What else? Disciplined spending. Money wasted on eating out, travel, entertainment, and gift giving might be better tucked away in a money market account earning a little interest. I'm not saying that eating out every once in awhile isn't a fun thing to do, but it can be costly.

Suppose I go out for lunch every afternoon at work. If my average meal costs $7, I'm spending $35 a week on food. That's over $1800 a year on work lunches! Where I come from, that's a lot of money. And it gets better...

Let's say that I am a 25 year-old young professional. If I were to invest that $1820 from my first year on the job in something that returns 8% annually, I'd have over $36K when I retire. And that's just from the first year.

Now let's suppose I save that lunch money every day of my working life. How does over $471K sound to you?

Again, I don't think this means one should eat ham sandwiches from home every day, but there is something to be said for identifying the money leaks in your buckets and plugging some of the holes.