Mind the Beginner

Yesterday, the lottery in The Netherlands was up to a record breaking amount of money (€27 million)  to be won and it was guaranteed to be won by someone. You can imagine the frenzy. People literally bought hundreds of tickets and were already spending the money in their head. You know how that goes. “I would by a new car! No wait, two cars!” Aside from the stupidity of buying a new car as opposed to a relatively new used car is that really what’s important?

It’s well known that people who suddenly come to great riches tend do squander it just as fast. They’re not accustomed to managing money. One of the reasons few people become rich.

Even so, (almost) everybody dreams of being rich. I found a great quote on that I’d like to share with you:

“The best way to make your dreams come true is to wake up”
- Paul Valery

Yes, well all share that dream on one way or the other. Even those who are rich dream of being richer. It’s almost a universal truth. And yes, I dream of being wealthy too, or at least, having enough savings to be able to live comfortably from the interest. I estimate that goal to be €1,3 million in the bank at 3,5% interest. If the interest were higher (and it often is) say 5% under a million (.96) would more than do it. With relatively low risk to your savings you can generate an even higher interest rate.

See those numbers? It’s not that big now is it. Even if you don’t make a six figure income you can reach this point. It all depends on two things: Be realistic and be frugal, keep it simple and keep it safe.

Okay, now it’s time for you to laugh. Here I am, a blogger/student who’s 26. Doesn’t have a penny’s worth of savings talking about having a million in the bank. My old classmates are lawyers, engineers or otherwise already earning an income. And I’m being realistic or dreaming?

Actually, yes I’m dead serious. Chances of you winning the lottery are astronomical at best. You’re better of putting that money to some use instead of throwing it away. Let’s say you’re a typical player buying two lottery tickets every month, €5 Each and you do that for forty years, most people play their entire life. That’s €4800 spent. But with an interest of only 3.5% you could have had €10,337. An increase of 46% over all that time and very likely a better “result” than playing the lottery.

Okay, those are small numbers but there are so many things that are simply not worth what we pay for them. Most things we don’t even need. As I talked about before, the reason minimalists often have such great homes is because

• 1: They aren’t cluttered and
• 2: because they only need a few things, the few things they do buy are of good quality.

We live in a world that’s trying to convince us that quantity is all that counts. After all, we’ll buy two new cars when we win. More jewelry, more expensive watches, more bling (What a horrible word btw), more TVs, more useless clutter you “need” to show others your wealth.

It’s time to stop dreaming about those riches and come to grips with reality. You will not win the lottery. Being frugal and saving is the way to go. It’s not glamorous and it’s slow, but it’s a far better path to riches. And besides, you’ll learn a great deal about managing your money so by the time you do reach that point when you can live off the interest (a passive income)  you’ll know how to manage your money and you’ll think twice before buying a new car. Make a habit out of saving and being frugal. Eventually you’ve worked so long and hard to get where you are, you’ll take great care not to throw it all away just like that.