Investing your money will give you two great opportunities. First, the money provides you against future risks. Second, you can do many things with the money that you dream about. But often people don’t know, where to get the money from.
When I’m talking to people about investing, I all to often can perceive two reactions, especially from young people. The first reaction is sincere interest in that topic. You can have a lively conversation about the many different investment possibilities, the latest news and movements of the capital market, and so on. People often ask me for a tip. I never give any, but one: learn to invest and then invest! The first one is relatively easy, but the second is not. Why? People say, they have no money for investing and they don’t know where to get it from. That’s the second reaction.
Why people have no money?
I always ask the people why they have no money to invest and the answer is always the same. “I don’t earn enough to save.” “We have so many things to pay.” “Everything is so expensive. ”
Then I ask, if they think that it would change someday. And many people tell me they hope, but they really couldn’t know.
“So, you think that maybe you will never be able to save money and invest it?” I ask then.
“Maybe”, is the answer, “but it’s easy for you to say. You don’t have to think about where to get the money from!”
“Yes” I say, “But I also had to start once. Like everyone.”
That’s the moment when people become curious. And they want to know how I started and what they can do, to get started, too.
When I started investing more than 25 years ago, I was a high school student at the age of 18, just one year to go to get
exam. After school, I was working in a supermarket to get a little money. I earned 300 Deutsche Mark. It wasn’t much, but it was my hard earned money and I was kind of proud. I got an old rotten car and a girlfriend. Both were expensive, as you may know. So, saving money for my first investment wasn’t easy, too.
But as the saying goes: Where there is a will, there is a way.
So, where do you get the money from?
It’s not that difficult to answer this question. All you have to do is finding out where your money goes. Sounds weird? It isn’t! It is surprising to see where we spend our money for. So, take two or three month and write everything down for what you have spent money on and how much. That’s the first part. You will be astonished, what you have bought.
Always live below your financial means so that you will have money to invest. (Charlie Munger)
Getting wealthy is like ruling a snowball. Start early and try to roll that snowball for a very long time. (Charlie Munger)
Now comes the main part. Think about what of all these thinks you’ve bought you really need and on which things you can forgive. Be honst with yourself. Delete everything you don’t really need and add up the money you could save. That’s the money you can invest!
You think, you have nothing to delete and save? You may be wrong!
Need an example!
Okay! So, here’s what I do! I love coffee and I need my coffee everyday. I can’t do anything without it. Day starts terrible when I don’t get some cups for breakfast. You know that feeling all too good? Great! That’s why you stop by at Starbucks on your way to work and get you a cup to go. Although you’re busy, the coffee is a must. You always take a Venti Cinnamon Dolce Latte. It’s only $4.65. Maybe you’re a thrifty person and $4.65 is too expensive for you. That’s why you get a Venti Freshly Brewed Coffee for only $2.45. Great.
Do you know what I’m paying for my coffee?
Well, I never leave home without drinking my morning coffee and every single cup I drink is around 20 to 25 cents. It depends on the coffee you buy. You see, even if you only buy the Venti Freshly Brewed Coffee at $2.45, I can drink ten times more coffee when I brew it myself at home. And that’s a lot of money. Let’s calculate it!
I drink 3 cups of coffee every morning. That’s 75 cents. I save $1.70 each morning compared with the Venti Freshly Brewed Coffee. I drink my coffee 365 days a year, so I save $620 every year. Compared with the Venti Cinnamon Dolce Latte I save around $1,400 This is a lot of money you can invest. And you get some nice stocks for it.
You’re not a coffee drinker?
Okay, that’s not bad. It was just an example. I’m sure you will find enough things where you can save. Remember the list I mentioned above. And even smalls things count, too. If you can save $5 a week on three things, you have $780 for investments. Over the long run this is not to be despised. And we haven’t counted in any interest.
It’s important that you go through everything you have and consume and decide honestly, if you really need it. My wife and I have found out that the most things we own are things that we can do without. Periodically, we check all our stuff and everything we haven’t used for a year or more has to leave our home. We’re giving all to those who are in need. We obviously are not. That’s why we haven’t used it for so long. But the better part is that my wife and I think twice if we really need any stuff although it’s not necessary. And what’s fascinating is that the more things you’re able to buy the less you need them.
Even Warren Buffett is known for his thrifty lifestyle. Certainly, his lifestyle is one key for his enormous wealth.
Don’t think, you have no money to invest. It’s not the money you’re missing, it’s the lifestyle you have. As Charlie Munger says:
“Always live below your financial means so that you will have money to invest.”
Disclaimer: The author holds shares of Starbucks.
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