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Here’s where I discuss my savings strategy. In order to build wealth we need to first be able to save a portion of our earnings. Savings is the most basic step a person can take toward becoming debt-free and building some serious wealth. Studies have found that whether or not a person is able to build wealth and become financial free has little to do with their investment choices and more to do with how much and how soon they’re able to save.
There are many different rules of thumb for how much we should save. Some say 10% of our salary is enough to retire, while others say we need to be saving much more due to people living longer in retirement. The key take away from these rules of thumb is that the more a person saves early on, will largely determine how soon they’re able to retire.
The reason has to do with how compounding works. Basically, when a person first starts to build up their savings, the bulk of the contributions come from their paychecks while a wee, tiny bit comes from earning interest. Over time, however, the situation reverses and the growth in savings depends less upon out of pocket contributions and more on the interest that it earns.
For a long time I focused on using my savings to buy income-producing assets that will increase my monthly cash flow. While I continue to do this, I also realize the need to have a small cash cushion, so I’ll be directing a small portion of my savings into a Tangerine Savings Account. If you’d like to open one, then visit the Tangerine website and remember to use the Orange Key More25 to get $50 in free bonus cash just for opening up an account!
I chose Tangerine because they typically offer some of the best interest rates for plain vanilla savings accounts and also because they regularly give out $50 sign-up bonuses.