Goldeneer’s Hierarchy Of Wealth – Fallacy Of Saving

Dec 12, 2012 1 Comment by

Goldeneer has developed a hierarchy model to build wealth in order to simplify the wealth building ladder. This model is based on frugality, savings, investments, leverage and shows us that wealth cannot be achieved by skipping any previous foundation.

Joe is a friend who is stuck at the Savings stage. He is incredibly frugal and has successfully built a large fund of savings currently placed in low risk, low return investments such as bonds. Keep in mind that he is highly risk adverse and would rather continue working the rest of his life saving more money than losing any of his savings in a risky investment during a bad year. Until he gets through the psychological barrier of taking a risk and investing his money in a higher return investment vehicle, he will not be wealthy. His money saved will in fact lose value every year as the bonds that he holds return less than inflation.

Joe seems to be really happy with his life and seems to value money conservation over wealth creation. This is perfectly fine for Joe as long as that is his true goal. When he reflects on my financially padded situation, I see some envy in his eyes therefore I question his true goal.

The fallacy of saving comes when you believe that saving is the only requirement to building wealth. It is an important first step in wealth creation but your wealth will soon stall when you don’t turn your savings into profitable investments. Putting savings in bonds for long term growth is not a profitable investment unless the economy is falling or you need to access this investment in the near future. Bonds don’t keep up with inflation therefore you need a very good reason to justify having some savings in bonds.

Frugality, Investment, Savings

About the author

Clara Cannes, the chief author from Goldeneer is a Canadian that works as a full time employee in the engineering field. Her passion is real estate, entrepreneurship and sustainability. Clara has finally reached financial independence in her late 20's and is on the path to a comfortable retirement by 35.

One Response to “Goldeneer’s Hierarchy Of Wealth – Fallacy Of Saving”

  1. Hiram Tanton says:

    Very exciting article! I’m looking forward to more articles from you & sharing more of your knowledge & tips. Please continue the great work.