High Savings Rate
The money you don’t spend your savings is the source of your future wealth.
In fact, I talk about this all the time as the “paradox of wealth”: the less money you spend on looking and feeling wealthy, the more real wealth you build. Real wealth exists in your investments, not in your car or clothes.
For a decade, my family and I lived overseas. We didn’t pay for housing, didn’t pay normal US income taxes (due to the foreign earned income exclusion), didn’t pay for our health insurance, and didn’t even have a car. And of course we paid less for everyday expenses like groceries, restaurants and childcare due to lower cost of living.
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Now that we’ve moved back to the States, we:
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Share one car (a used Hyundai Tucson)
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Negotiated affordable rent on a modest townhouse
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Opened an HSA in tandem with a high-deductible healthcare plan
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Minimize our tax bill through a combination of tax-sheltered accounts and tax-advantaged real estate investments
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Go out for meals and coffees less than we did abroad.
Do we have the same savings rate that we had overseas? No. But it’s still much, much higher than the average American’s.
High Investment Returns
About half our net worth is in stocks, and the stock market has admittedly had a great 6-7 years. But again, the only reason that’s helped us is because we’ve saved and invested so much money.
Because we participated. Half of life is showing up!
The other half of our net worth is in passive real estate investments. Most of those haven’t even delivered their full potential returns yet, since they haven’t sold to realize the profits.
Some investments are already paying high returns however. The Co-Investing Club has invested in notes that pay 10-15% interest, for example. All of those are paying in full.
As another example, last year we invested in a land fund that pays a 16% distribution yield. Every quarter, we collect 4% of our initial investment.
In fact, we liked that land fund so much we’re bringing it back to the Co-Investing Club to invest again. Join the Co-Investing Club to hop on that group call next week as we grill the operator together.
I invest as just one more member of the Co-Investing Club, month-in and month-out. This is how I invest to build wealth, and you’re welcome to join in.
