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My Top Five Tips on How to save Money

Here are some ways to save money over time:

Save Automatically

Setup a standing order with your bank to transfer a certain sum regularly (at least 30% of your salary per transfer) to a separate (investment) account.

Setup an account with a new bank and never touch that account. Don’t even link a credit card to that account so that you will never use that account for spending. When you get a salary increase also increase the transfer amount.


Invest part of your money. Don’t just put it aside. Otherwise at the current rate of inflation in western countries that money is condemned to lose 50% of its purchasing power in 20 years.

There are many ways to invest. Different asset classes. Equities, fixed income, real estate, commodities. You have to find out whats right for you. The key message here is: put your money to work!

Avoid Debt

Unless you are a high net-worth individual and can use debt to your advantage (to reduce your taxes), avoid debt. It might be tempting to buy a house or flat. But as soon as you take that mortgage you will be putting handcuffs on yourself. Imagine you will need to move to a different country or city in the next 10 minutes. How fast can you liquidate the assets debt that you accumulated? In other words you are not flexible when you have debt. If you lose your job tomorrow you are in big trouble. If you need to move to a different country and you just bought a house you are in big trouble. If interest rates increase you are in big trouble.

I am not saying that buying undervalued real estate on low interest rates is by default a bad idea. I am saying putting yourself over your head in debt just because you want to live the dream of owning a home or a nice car is a bad idea. Avoid debt, save some money, invest your money and then buy your dream asset when the time will come for you to retire early.

Ignore People Around You

Many people want to go on vacation in some exotic country because they see their neighbors traveling to an exotic country. They want a new car because their friends bought a new car.

It is important to know your financial limitations. If your neighbor just bought a \$100K car but you can only afford a \$5K used car then don’t go out and buy a car worth \$100K. Just because your neighbor can afford such a car doesn’t mean you can. Know your limits. All other factors aside, if your neighbor makes 3× as much money as you do, then they can probably afford a more expensive car than you can. You can replace the word “car” with “house”, “vacation”, “kids” btw. The same principle applies.

The key message here is: know your limits. That doesn’t mean you shouldn’t do anything about it. If you only can afford a \$5K used car then figure out a way to earn more money. But don’t buy a \$100K car so that it only appears that you earn more money. This is stupid and will only make you poorer.

Don’t Rely on Other People

Do not rely on other people (friends, family, employer) and assume that they will be helping you out with money or make sure you have a comfortable retirement.

Live your life knowing that tomorrow you can lose your job. Live your life assuming that you don’t have family or friends that can provide you with financial aid when you need it. The sooner you stop depending on other people and take ownership of your own financial situation the sooner you will grasp the importance of saving and investing money.