If you think you can save your way to riches, you’re wrong. Spending less than you make is not the path to riches. Instead, wealth comes and goes as asset prices like stock, real estate rise and fall on daily basis. This is why most people have no shot at ever being wealthy, while the already-wealthy people who own those assets just keep getting wealthier. Saving money isn’t necessarily a bad idea. It can help you in lots of ways. But, in the aggregate, it’s not how we get rich.
Recent years have shown just how misleading and harmful homilies like “work hard. Spend a little. Save the difference. Let your assets work for you,” a general advice are: misleading because saving is not the primary way wealth is accumulated; harmful because people when saving fails, people think they are the failure.
If you’ve internalized that advice, it’s hard not to feel like a failure. Most people incomes have finally halted their decade of decline with a year of stagnation. Wages are flat. Home prices, we found out, can go down as well as up. They’re recovered in some places, but many people saw most of their wealth disappear in the housing crisis. The stock market has been on a tear, of course. But that has meant rising wealth for a very small group.
Millions of people missed out on the wealth-spinning party by selling when stocks were low, or by being unable to afford to invest at all. Saving money won’t come close to helping them make up that wealth.