No and Yes. We are not fools because saving up for a rainy day is a wise thing to do. But yes, we are fools, because the way we are saving up is wrong.  The money we save up has poor velocity and returns are meagre. The winning formula has never been taught to us. Our parents did not know it themselves, so how could they teach it to us?

Look at the interest rate your bank offers you. It is about 2% in America and 6% in India.  Of course something goes into the Government coffers by way of tax and the rest is eroded by inflation. You get back a small sum or nothing at all, for all the pleasures you have forgone to save up that money. The bottom line is that you are not getting much for your pains.  At least the grasshopper had a good time.

The secret of getting somewhere quickly with your money is making sure that you understand money and its dynamics. You must learn to distinguish between assets and liabilities. You must learn to identify liabilities that are masked as assets and seeming liabilities that are really assets. For instance, if you have purchased a property with a loan and the rent on property repays the instalment of loan and also puts some money into your pocket, you have created an asset. If your house property draws money out of your pocket and puts nothing into your pocket, it is a liability.  Unless you are going to trade your smaller property in for purchasing a bigger property(taking advantage of prevailing tax laws) with a larger loan that pays for itself, the capital appreciation really does not count!  It will not create wealth for you.

If you cease to look at money as an object, a possession, you will begin to see that money is really an idea.  Ideas are made up of words and words have momentum and direction. They fulfil a destiny.  For instance, instead of repeatedly saying “I cannot afford something”, try saying “how can I afford it?” You will find that you begin to have ideas about how to make money and how to get money working for you.

It is also important to understand that it does not take money to make money. Money can be made out of –an idea, a concept.  Thereafter, you only need to work on the idea of geting your money to make you money! Look at the forward trading market and the stock market and you will realize that money can be made without investing money!

In brief, you need to change your mind set about money. You need to make your money work for you even if you work for money meanwhile.  Becoming rich and having enough money for the rainy day requires meticulous planning and compelte understing of the dynamics of money.