Many people would like to know How To Save Money To Invest. I’ve discovered, what I consider, the 3 Secrets To Saving Money. If you’re having trouble saving money, you’ll want to read this blog post carefully.

Secret Number 1 For How To Save To Invest: Know, Understand and Live – Parkinson’s Law

According to Parkinson’s law, “work expands in order to fill the time available for its completion” I learned about this law, long before I knew what it was called. In my first online business, I turned my hobby – which is learning foreign languages – into a business that creates and sells foreign-language learning products- such as learning-Spanish. I would write all of the Spanish lessons, then I’d have a native Spanish-speaking Spanish-instructor check the lessons, and then we’d go into a studio in New York City and record the lessons.

When I would write the Spanish lessons, I noticed that sometimes it took me an entire day – just to write one lesson – which was very time-consuming. So what I started doing was blocking out 4 hours a day to write a lesson. I blocked the time out every day at the same time. From 8:00 AM to 12 noon. And I would schedule something else to do for the rest of the day when I returned from lunch at 1:00 PM. So there was no way I could return to writing a Spanish lesson that day – without neglecting something else.  And do you know what happened?

I miraculously managed to write each Spanish lesson in just 4 hours. Then I tried something else.

I blocked out just 3 hours to write a Spanish lesson. From 8:00 AM to 11:00 AM. And somehow,  I managed to write each lesson in just 3 hours.  I know at this point you’re probably saying, “OK, Patrick, I get the point of Parkinson’s law: Work expands in order to fill the time available for its completion – But what does this have to do with saving more money?”

Well, Parkinson’s Law doesn’t only apply to time-management. It’s also applicable to savings and investing.  Pay very close attention – to what I’m about to say now:   ‘Expenses expand – in order to spend – the money you have available to pay for them”

In the same way that I’d limit the amount time I had to write each Spanish lesson for my business, you must limit the amount of money you have to spend on both discretionary and non-discretionary expenses. Instead of spending 100% of your income on expenses,only spend 90% and save and invest the remaining 10%. Or spend 80% on expenses and save and invest 20%. Or spend 70% on expenses and save and invest 30%.

This is a very useful strategy for those hoping to learn how to save money to invest.

Secret Number 2: Create A Winning Environment

I’ve been into physical fitness and nutrition since I was a teenager. But I seem to be more focused on fitness and nutrition, when I’m about to take a vacation somewhere with a really nice beach. I live in Medellin, Colombia. But before moving to Medellin – back when I still lived in New York – I took a trip to Barranquilla, Colombia. Barranquilla is on the Caribbean coast of Colombia and it’s also near Cartagena – which is located close to some of the best beaches in Colombia.

So it’s about 4 weeks before my trip to Barranquilla. I’m 12 pounds above my ideal weight of 170 pounds. I’m managing to exercise and eat right during the day. And then at night, I tell myself:  for eating right the whole day and doing my exercise routine, I deserve to treat myself to just one bottle of Heineken.

So I take a bottle of Heineken out of my refrigerator to drink. And the next thing, I know . . .  1 beer becomes 2 or 3. And drinking beer, then gives me a craving to eat something. And in the Bronx, New York, you can find pizza, fried chicken, Dominican food, Jamaican food, Halal food-  almost anything you want to eat – 24-7. So with less than 4 weeks before my trip to Barranquilla, I realize that if I do not make a drastic change, I’m going to be on the beach with a beer belly. 

And it’s a lot easier for me to change my environment, than it is for me to change my behavior. It takes a lot of will power for me to say “no” to a 6-pack of cold Heinekens sitting in my refrigerator calling my name.  But it also takes a lot will power for me to put on my boots, jeans, a hoodie, a winter coat and then leave my warm home at night to get in a freezing car- just to go buy some beer. So I remove all of the remaining bottles of Heineken from my refrigerator. “Remove” as in “to drink” – but of course, I don’t buy anymore Heinekens to put in my refrigerator.

And that’s how I create “A Winning Environment” – because if there are no bottles of Heineken in my refrigerator at night – the temptation of drinking beer is removed. Fast forward  4 weeks later, I’m exactly 170 pounds – my ideal body weight for my trip to – the Caribbean coast of Colombia. 

So how do you “Create A Winning Environment” that will allow you to save and invest?

Set-up automatic deposits so that as soon as your pay check goes into your checking account,  a fixed amount is then automatically deposited into your Vanguard account, Fidelity account or wherever you have your investment accounts. Since you have removed the money from your checking account- where you would’ve had easy access to it with your ATM card –  you have now removed the temptation to spend your savings. 

Secret Number 3 For How To Save To Invest: Change Your Identity

Several years ago, if someone had asked, “Patrick, how do you identify yourself – with respect to savings and investing” And I would’ve replied, “I’m a person who wants to save and invest?” I might’ve even said, “I’m a person who is committed to saving and investing”

But if someone were to ask me that same question today, my response would be, “I AM AN INVESTOR” –  This small shift in mindset – and identity – has had a tremendous impact on my savings and investing. You make think it’s very minor or even insignificant. But it’ll have a huge impact on your savings. And let me tell you why.

A person who identifies as someone who wants to save and invest or learn how to save money to invest– has the behavior, habits and mindset of someone – who simply wants to save and invest. On the other hand, a person who identifies as an investor, has the behavior, habits and mindset- of an investor. What’s the difference?

  • Someone who wants to save and invest – lives by the following formula: After tax Income minus expenses = savings or investments 
  • And if the person is self-employed –but they want to save and invest, they live by this formula: Income minus taxes minus expenses = savings or investments 
  • But an investor lives by this formula: Income minus saving or investments minus taxes = expenses

An investor makes saving and investing a priority. Poor people make paying bills a priority. 

When I tell people this, they ask, “If someone invests their money first –and then pays taxes and expenses with what’s left over – what does the person do?- if they don’t have enough money left over to pay their bills or expenses?” Well, how many investors do you know who have their lights or gas cut-off? Not too many, if any.

As we learned from Parkinson’s law, “expenses expand – in order to spend the money you have available to pay for them”

When you “change your identity” and start identifying yourself as an investor, you have learnt how to save money to invest – and then you’ll pay your taxes – and with the remaining money you’ll pay your bills and other expenses.

And if you have a regular job – as opposed to being self-employed – – but you identify as an investor – when you receive your weekly or bi-weekly after-tax pay, you’ll have a certain percentage automatically taken from your pay and deposited in your investment account – and with the remaining money you’ll pay your bills and other expenses.

Of course, this leaves less money to pay for expenses. And that’s a good thing – because it’ll force you – to find more creative ways to budget your money and live more frugally. If not —you’ll find yourself without gas or electricity.

I hope you’ve learned how to save money to invest. If you enjoyed this blog post, then you’ll enjoy my blog post covering Reasons Why You Should Invest In Index Funds