Mikael Rieck is the author of more than hundred articles on topics of how to make money both online and offline. He has been online since 1999 and has always had a passion for money making opportunities and teaching others how to make a profit.Retire at 55 – Tip #4 – Investing Instead of Spending
In today’s post I will give you the fourth tip to help you retire at 55 or younger and this tip will not only be able to help you with your retirement but can also make you wealthy if you use it right.
But before we dive into the post I would like to remind you to read or re-read the three previous posts:
Tip #1 – Start Now
Tip #2 – Make More Money
Tip #3 – Drop Excessive Spending
If you didn’t already know then let me quote Tony Robbins:
“Repetition is the mother of skill”
I don’t know if he is the original source of that quote but it’s still good advice 
The Difference Between Investing and Spending
You can probably find a lot of different takes on this difference but here is mine:
“Spending Has The Intention Of Losing Money Whereas Investing Has The Intention Of Making Money”
So now you might say that playing to lottery has nothing to do with investing and I see your point. I will however call it a kind of investment but with extremely bad odds
We can go into a lot of arguments about whether something is a good investment or not but that is not the point of this post. The point is to let you know that there is a difference between the two and secondly that if you are only doing the spending part you will never be able to retire before time.
Become Good at Investing
Investing is actually a part of the second tip I talked about on making more money because the most common purpose of making an investment is to make you more money.
But as you probably know it is not always easy to invest and sometimes even your intention will not be enough for you to make money from the investment.
There are good investments and bad investments and as we have just talked about, playing the lottery is in the bad end of the scale.
The scale of whether an investment is good or bad is determined by many factors but one of the primary factors are your skills. If you lack the skills you can make a possibly good investment and turn it into crap and vice versa. I bet that if you had no real estate development skills and you and Donald Trump were able to buy the same building, he would more than likely make it into a far better investment than you would.
Investing is no different than any other skill set. Just like a carpenter is great with wood, so can a diligent investor become good at making investments. But it will not happen overnight and it will require study and practice on your part (just like the carpenter did to become great with wood).
Conclusion
If you major in spending but know very little about investing and turning your money into more money, you are missing out. It does not require a genius to make money into more money but it WILL require action and determination.
If you don’t know whether you are doing the right thing or not, let me finish off with these 3 questions that you can ask yourself:
- How big a percentage of your last paycheck was invested?
- How many hours did you spend on making those investments (if any)?
- How many hours did you study to learn more and become a better investor?
If your answers a “zero” or close, then you’re not on the right track.
To Your Success,
Mikael
P.S. Be sure to follow me on Twitter
8 Responses so far
Nicolas Prudhon@SEO Help
August 14th, 2009
11:14 am
Hi Mikael,
Actually, I’ve always tried to apply the 1/3 rule:
_ 1/3 of my income to cover all my expenses.
_ 1/3 of my income to enjoy and do whatever I want with it.
_ 1/3 of my income to save and invest.
It’s basic and simple but works great.
.-= Nicolas Prudhon@SEO Help´s last blog ..The Greater Debate About Backlinks Building – Part 2/3 =-.
Mikael
August 14th, 2009
11:25 am
Hi Nicolas,
That one is new to me. What I have normally heard (and what is e.g. described in The Richest Man in Babylon) is that you use 70% on your expenses, 10% on fun, 10% on investments and 10% on charity.
But I guess that when money in no longer a problem, then your plan will make things move along a lot faster
Nicolas Prudhon@SEO Help
August 14th, 2009
11:29 am
When I learned about this concept, it’s based on the fact that each month, you are actually saving one month worth of expenses.
Now, I understand that for lower budgets, this may be difficult to fit in.
I think, regardless of the method or ratio, as long as you are doing something to better yourself and your life, you’ll be fine!
.-= Nicolas Prudhon@SEO Help´s last blog ..Google Caffeine Next Generation Search Engine =-.
Mikael
August 14th, 2009
11:35 am
I think that for everyone not already doing it (despite their budget) it can be a challenge. Going from spending 100% to only spend 33% would be a giant leap.
We agree that all small steps in the right direction will get you there. It’s only a matter of time.
Nicolas Prudhon@SEO Help
August 14th, 2009
11:47 am
It may be difficult indeed for some people to cut down their expenses, but at least for the new income earners, it may be a good idea to consider their income to be 33% less than what it actually is.
If someone earns $3,000 a month, he will actually do much better with his finances if he considers his income to be $2,000 rather than considering it to be $3,000 and having to put aside $1,000.
Although the end result is apparently the same, the psychological involvement and behavior resulting is very different.
If you have spend $1,900 and you wonder about something at $150, you know and feel that you are over what you can afford. On the other hand, if you consider your income at $3,000, you are very likely even the item is at $500 to say yes, telling yourself that you are still saving $600 this month.
The problem with this behavior is that before long, you are no longer saving at all….
.-= Nicolas Prudhon@SEO Help´s last blog ..The Greater Debate About Backlinks Building – Part 2/3 =-.
Geoff@San Diego Realtors
August 24th, 2009
9:48 am
One of the most important lessons here is to stay active with your investments. A lot of people were gun-shy and pulled their money out of the markets last fall. Now there has been a huge run in equities and those same people have missed the boat. The opportunity is the same with real estate right now. The time to buy is when prices are down. Move against the herd in order to make money with investments. If you wait until everyone else is moving in the same direction then it’s too late.
.-= Geoff@San Diego Realtors´s last blog ..San Diego Homes More Affordable =-.
Mikael
August 24th, 2009
9:52 am
Hi Geoff,
I am personally of the belief that opportunities are everywhere and new ones are created every second of the day. I do see your point and understand your view but I honest don’t think there is such a thing as a “missed boat”.
By keeping your eyes open and your mind willing, you can find more opportunities than you will ever be able to handle.
Tommy
July 13th, 2010
9:50 am
I’m just about to end my education and are thus used to not having large expenses. So I actually think that I could invest 2/3 of the money I would earn when getting a job… if I don’t fall in the same trap as everybody else and rais my living-expenses
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