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That proves reason enough to spend less and invest more.
But its just the tip of the proverbial iceberg.
Consider the following hidden benefits of a high savings rate,beyond simply building wealth faster.
And the lower your living expenses, the less passive income youll need to cover them.
Consider afew simple numbers.
That means you better save up a nest egg equal to 25 times your annual spending.
To state the obvious, its far easier to reach $1.25 million in savings than $2.5 million.
Freedom To Choose Your Ideal Work
Ever heard of the golden handcuffs?
It refers to feeling chained to a job you dont love because of its strong income and benefits.
Consider a person earning (and spending) $100,000 a year.
They havelittle wiggle roomin their budget.
Next, consider their more frugal friend who also earns $100,000 a year but spends only $50,000.
They wake up one day and say, You know what?
This job is not why I was put here on this earth.
Im wasting my talents and my life.
Its time to switch tomy dream work even if it pays half as much.
They can have the freedom to do that because they spend so much less than they earn.
However, if you have a high savings rate, this could potentially be avoided.
They have a high savings rate and live on less than they make.
Consider a worker earning $55,000.
And thats just an IRA.
The same principle applies to solo 401(k) accounts,health savings accountsand other tax-deductible contributions.
Alternatively, you could come at taxes from the other side and contribute to a Roth account.
Either way, the result looks similar: Youll pay lower taxes because you saved and invested more money.
That gives you access tomore real estate syndicationsand other private equity investments.
Nonaccredited investors can still access some of these investments, but they have to work harder to find them.
Often, that involves joining an investment club where members go in on these investments together.
But that doesnt make stress any less real.
Households that spendnearly every dollarthey earn live on the edge.
Theres little room for error.
They may have to max out their credit card or take a payday loan or other high-interest debt.
But it doesnt always cause a crisis.
It takes discipline, but that discipline comes with enormous benefits some more obvious than others.
These benefits compound on one another too.
Escaping the rat race isnt just about earning more, but about spending less and investing the rest.
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