Introduction
“The difference between successful people and really successful people is that really successful people say no to almost everything.” – Warren Buffett.
What I think Warren is implying here relates to various opportunities as they arise. He advocates that you need to say yes to the right opportunities and do business with the right people. However, I interpret this a different way and find it applicable in my journey of accumulating wealth. I read it as saying no to various things that prevent us from reaching our goals…more specifically saying no to unnecessary expenses. Constantly saying no to expenses that do not offer a return on investment is a way of life that I have adopted. The problem is…it takes a harsh toll on your social circle and usually drastically reduces the amount of commitments made to having fun.
Saying no to almost everything that does not have a return on investment for me….in a financial sense, is extremely trialing. It is hard to constantly say no to friends or to not do certain things that come with a price tag. However, I say no because a monumental component along the road to wealth, especially early on, is to be frugal. One must spend money wisely in order to accumulate wealth. Within “The Richest Man in Babylon”, which is a well-known personal finance book, a message is conveyed that explains that every “gold coin” (or dollar) is like a worker. That worker has the ability to produce other workers, and those workers then can produce even more. In essence, it is the idea of having money work for you. It is impossible to do this if an individual is constantly saying yes to every opportunity to spend money and/or having fun. It is crucial to understand this concept.
Saying No to Say Yes
Building wealth is a journey. It’s all about acquiring assets. Assets are resources with economic value one controls with the expectation that it will provide future benefit. The pursuit in building true wealth entails years and perhaps decades of layering assets together in order to eventually provide financial freedom. By saying no to pleasure and things that do not provide value, I can say yes to things that do matter…such as saving for these assets. As described above with the Richest Man in Babylon concept, these dollars saved as a result of saying no can purchase assets such as stocks, bonds, real estate, or education.
One of the key difficulties here, besides constantly saying no to things you may want in the short-term, is tracking these expenses. It’s easy to spend $10 here and $20 there without realizing how drastic this can be on your long-term financial picture. To combat this, I highly recommend every individual who is serious about their finances to use Personal Capital…which is a software tool that shows your entire financial structure. Through this, you can track various expenditures. Click here to acquire Personal Capital for free! I remember acquiring the software and realizing that if I started saying no to things, as oppose to saying yes here and there, I would start to rake in incredible saving surpluses each month that I could in turn invest into assets. So, by saying no to useless expenses, not only do you not spend the money, you can save the money and also have that money create more economic resources for you. This is powerful stuff. Trust me, you have to see it to believe it. This is possible through personal finance software.
For example, one month this past summer I spent $775 on fun. If I were to take that amount and invest it into a diversified portfolio of investments for a 30 year period with a 10% return, I could have $13,523. In addition, if I were to save $775 a month for an entire year given the same circumstances above I could have $147,639. Now that’s a nice chunk of change…and this is only one area of spending and one year of saving. Compound this and save in multiple areas and over the course of multiple years….and you’re talking hundreds of thousands and perhaps millions of dollars. Millions…
Conclusion
Years of constantly saving through various savings vehicles provides a profound effect on one’s finances. You often hear, “It’s not about how much you earn, it’s about how much you save”. This is such a powerful statement. Although, it is very important to earn a lot of money, it is even more important, especially early in life, to save. By constantly saving this money, you can create passive income streams and produce a mountain of wealth. You just have to have the courage to say no. You will receive push back, but this push back usually roots from people who are not wealthy. Wealthy people understand that you need to save money. Not spend it.
Learn the ability to say no…so that you can say yes.
Redefine.
-James