I worked in banking for most of my career, and as bankers, we used to laugh at savers. That’s a truth I don’t like to admit.

It wasn’t because we liked being right or thought we were smarter; it was because it was a perfect example of how bad our education is when it comes to money.

We’re taught laughable misinformation about money and then we go out into the working world to dedicate our career to earning it.

If you’re working for money and you don’t understand how it works, it’s going to hurt you in so many unexpected ways. You have to move away from the mindset that “saving is good.”

There is a much simpler way to think about your money that will set you up financially and allow you to stress less and work less if you choose (not financial advice). Here we go.

It’s Not About How Much You Make

You can make lots of money and still lose the lot if you don’t understand how it works. Many famous people like Mike Tyson made plenty of money and still ended up broke.

Lottery winners are more likely to end up bankrupt within three to five years of them making millions of dollars, than the average person. I know guys making $500K a year who, when this recent recession hit, started running out of money real fast.

You can make plenty of money if you’re connected to the internet by creating content, setting up a website, starting a podcast, promoting other people’s products, writing eBooks, running virtual summits — the list is endless.

Making money is the easy part to understand.

It’s Not About How Much You Save

If you take the simple approach of making money and then saving it, it’s not going to end well for you.

This image perfectly describes why saving money will destroy you financially.

Every minute you save money is another minute inflation is eating away at you, and the time and effort you spent to earn it. Why work really hard and then have your money be devalued? It doesn’t make any sense. It’s madness.

How to Have Money Work for You, Not Against You

There is a solution to this problem of saving money and you don’t have to be an investment guru like Warren Buffett to understand it.

You can prevent yourself from being financially destroyed by money when you change your approach to this:

It’s *not* about how much money you make.

It’s *not* about how much money you save.

It’s about you how much you invest.

Investing your money simply means putting your money to work (for you).

The money you make needs to be invested. You have a few options, which you already know, but here they are; gold, real estate, bonds, stocks, digital currencies. That is where you can place your money so that inflation doesn’t kill everything you’ve worked for.

You will still be destroyed financially if you don’t take this extra step

Even if you invest your money it still won’t help you. Investing your money is not enough because you need to understand one more idea: diversification. (Money experts that charge you $1000 an hour for their time call it asset allocation but we’re not fancy and just want to get to the point.)

The hardest part to understand is how much money to place into each asset class. Hedge funds that invest billions of dollars spend decades mastering this one skill and it’s their secret sauce.

The solution to this problem is different for everybody. How much money you invest in each asset class depends on your financial situation and your age.

If you’re broke or have lots of credit card debt then you’re normally going to focus on wiping that out first before worrying about investing. If you have no debt but only have less than $10,000 then you’re probably going to want to be more cautious in case you need access to that money. If you have $100K or more to invest then you might want to be a little more aggressive.

If you’re a millennial like me then you may want to go a little more aggressive into stocks because you’ll have time to ride out any recessions.

The way to save yourself financially is to learn about where you should invest your money and how much cash to allocate to each asset class.

In really simple terms, you want to learn enough about money that you can successfully put a percentage value next to each asset class. Here is a mock example:

Gold: 5%
Real Estate: 30%
Digital Currency: 5%
Bonds: 20%
Stocks: 40%

Learn about each of these asset classes and then allocate your money accordingly.

The next challenge

Each of these asset classes has subcategories.

For example, there are treasury bonds and junk bonds, and there are small-cap, large-cap, and tech stocks to choose from. This is the next level of detail and it requires further learning to understand what makes sense for you.

An easy solution is to buy index funds for stocks, bonds, and even real estate, so you get exposure to each. The cheapest index fund I’ve found is Vanguard and they are widely recommended. They obviously have many different products so it requires a bit of research before deciding.

The state of the economy

There is one last consideration you need to think about when you invest your money and diversify across different assets based on your age: where are we at in the economic cycle?

In other words, is the stock market and economy in a period of extreme growth, very little growth, or recession? As I write this, we’re in a recession.

Thinking about the state of the markets is important because it shapes what assets you buy. Right now we are living in an upside-down global economy with negative oil prices, massive amounts of money printing, negative-yielding bonds, and expected inflation that is higher than normal.

So in a recession, you might like that stocks are cheap because you get a discount. You might want to own fewer bonds because some of them pay you nothing. You might want to look at inflation resistant assets because times are uncertain.

The easiest way I’ve found to look at what sort of financial times we’re in is to think about the markets as seasons: summer, spring, autumn (fall), winter. In 2019 it was like summer and you could make plenty.

Right now it’s definitely “winter” and those who took too much risk are being wiped out.

Choose a season and then invest accordingly.

Final Thought

Saving money will destroy you, as we’ve seen with the devaluing of the dollar over time because of inflation.

Making money is pointless if you don’t keep any of it, and end up going mad and spending it like every day is Christmas Eve. The strategy that makes sense when it comes to money is to invest it so your money is working for you, not against you because of inflation.

Put your money into assets that make you more money or assets that protect you in times of uncertainty due to a recession.

Then, when you think about investing, consider your age, financial circumstances, how you’re going to diversify across different asset classes, and the financial season the economy is in.

If you make money and invest — instead of saving — you will have the money to stress less, do work you enjoy, and help others.