by Syl Tamanda

Definition of Savings

The money you keep, especially in a bank or other financial organization” (Cambridge Dictionary).

The power of savings

The sooner you start putting aside some of your income, and investing that money, the sooner it will start earning money all by itself. Then the earnings on those earnings will start earning their own money, and a snow bowl effect is set.

The Relationship between Savings & Retirement

For the purpose of this article, “Savings” is defined as the a percentage of our total earnings, kept in a bank or any other official scheme.

Whilst a retirement is when one leaves their job or stops working for the purpose of earning an income.

How to Grow Wealth From Nothing.

Growing wealth from scratch isn’t as challenging as a lot of people imagine it to be. If you are able to understand easy it is to plant a tree, the same analogy is true for growing wealth. I would imagine that, all you need to do is to throw a seed into the ground, water it and let it grow into that massive Iroko tree that looks intimidating and impossible to bring down. On the other hand , using the same principle to grow wealth,all you have to do is make sure to save at least 1/10th of every money you earn. No matter how small it is, the first amount that you are able to save, which is later invested into any venture that rewards you with more earnings, is your first planted seed of wealth. A very wealthy man in city of Babylon once said “To find the path to wealth, a part of all that you earn must be yours to keep”.

According to Investopedia, the basic steps to accumulate wealth over time is to make money, save some of the money made, and invest the money saved. Becoming independent is all about repeating the process of making money, saving money and investing your money into a diverse portfolio .

As soon as you start earning income from your investments , enough to pay for your basic living expenses, whilst maintaining a large amount of your earnings in other investments as a hedge against yearly inflation, then you can contemplate handing over that resignation letter to your boss .

Retiring as early as 35 years of Age

As established earlier, to retire early is to stop worry about pleasing a boss at work, rising at 5am in the morning no matter how horrible the weather maybe, in order to get to work in time, putting in long hours at work in the quest for a promotion or special bonus, and putting on a facade at a job you absolutely hate, just for the sake of paying your bills. When you no longer worry about working to pay your bills, and do the the stuff you love, you can give yourself a part on the back.

However, in order to earn that heart warming congratulatory note, we must understand the process and put in the the WORK. The chart below is a demonstration of the correlation between the amount of money you save, and the number of years before you clear up your desk, and take that permanent leave off work.

For example, if your earning is $100, and you are able to save 75% of that amount, the chart suggests that you are eligible to retire 7 years down the line. Having said that, it is crucial to mention that simply putting away 75% into a savings account or underneath your mattress will not provide that money tree to enable you retire. The goal is to save as much, and invest as much, and then invest the earnings of the investment too!, i know it sounds complex but it is super easy. Instead of going about buying new clothes, shoes, and hoarding material stuff that you do not need, focus on the things that your money can earn, and what the money it earns can earn. You can invest into a transport motor bike , a restaurant, a hair saloon, a cosmetic shop, a grocery store, a clothing shop, etc., provided that you spread your risk across multiple sectors. Keep trying out new things, based off of the ideas you write down daily, as per the previous article Becoming What We Think About!

It is very important to remember that valuing frugality, and simplicity will make a more outstanding change in your journey to independence, and enhance your chances for an early retirement a thousand times better than, increasing your income. Imagine that each month, you learn how to live on $30 from your $100 income, this has two major advantages:

  • your amount of disposable income available to save increases monthly and yearly and so on!
  • the practice of living on less becomes a habit that forces you to permanently reduce the amount of money you shall require monthly, for the rest of your retirement life.

In a nutshell, it is imperative for you to earn an income from which a percentage of your savings will emanate from.The larger your income, the more your savings of-course!. However, the jackpot lies on getting your savings to earn money which will equally be invested into other things to earn much more money. That’s how you buy that jeep you want, build that house on your vision board, and jump into a plane ,en route to your favourite holiday destination.

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