Wednesday, July 7, 2010

The Power of Saving Money

Have you heard of the Golden Handcuffs? I was meeting with Matt (initial founder of exchangehut.com) and we were talking about life and finances. He was talking about how in our culture we have what we call "Golden Handcuffs". This is based on the idea that as you make more money, you continue to spend more money. Once you are used to spending money you can never really take a pay cut and survive.

The smartest thing I did in high school and college (without me knowing it) was save money.

By stock piling raw cash, it gives you a flexibility and freedom that you can't get anyway else. It gives you flexibility to leave your job and be unemployed for months and maybe years and still be able to survive. It enables you to invest in other companies. It enables you to tell your employer "no". It enables you to take that family vacation for 2 months to Europe. It enables you to donate more generously to a charity.

If your are looking to do a startup in your future, get a great regular job for a company that will teach you invaluable skills. Save as much money as you can - like 50-65% of your take home income. If you do this, then when the perfect opportunity for your startup comes you will be ready. Even if you never do a startup, you still end up with a pile of cash for home investments, traveling with your kids, or even high risk investments. In a society so driven by debt, if you have cash it puts you on top of negotiations which is a great place to do business from :-)