Principle 7: Start building wealth through savings

W hat is your attitude toward your paycheck every month? Do you consider it your reward for working hard and your key to unwinding through shopping, eating out, and the like? Or do you immediately feel that your salary is inadequate for your bills and spend the day sulking in a corner while your officemates are out to a fancy payday lunch? I hope you feel neither of the two.

What is your attitude in the days before payday? Is there an excited anticipation of your coming renewed ability to spend? Is there relief that your bills won’t break the bank anymore?

The point of all these questions is too see how—and if—you save money from your paychecks (or profits if you’re an entrepreneur). Award-winning financial analyst and valuation expert Andrew Stotz believes we should “take pride in spending much less” than our monthly income.

The concrete ways Mr. Stotz advised the students of his seminar series from October 2–4 in Manila, Philippines were the following: 1) reduce debt 2) start investing once debt-free 3) set aside money for investment every month.

Almost all of us, at one point or another, will incur debts as we conduct our daily lives. Some emergencies are terribly unexpected. Sometimes, one cannot jump-start his or her saving because a relative is sick, a sibling’s tuition payment period is getting near, a parent lost money in a casino, a friend needs to borrow money for whatever reason. In short, a lot of “excuses” will always come up in the future to derail your saving-up time. As much as possible, prepare for these situations before they even happen by saving up at least three months’ worth of pay.

Meanwhile, Mr. Stotz also shared an important nugget, saying that “cutting costs won’t get you rich.” While there should be a savings plan you follow religiously, this does not mean we are to focus on being wealthy as the ultimate goal. What Mr. Stotz wants is for us to focus on being financially independent, not getting rich. Financial independence is achieved, according to the CFA Thailand Society president, when your passive income—for example, dividends from stocks—are enough to fund your day-to-day lifestyle. This means that even if you liquidate a portion of your investments, you are still very much protected.

We can only achieve this life if we start saving at a very early age. The great thing about some banks now is that they are promoting simple saving accounts for children! If you are a parent, teach your kids to save up. If you are single, set a good example and tell the world about the comfortable feeling of knowing that you are both prepared for any emergency and able to invest in the stock market at once.

P.S. Compare savings accounts well. Find the one with a reasonable required minimum balance and one that has the highest interest rate. And make sure that bank has a lot of ATMs across your town or city in case of emergency.

Danielle covered the three-day university tour of Andrew Stotz in the Philippines from October 2 to 4, 2014. She will discuss each of Andrew’s 12 investment principles from her perspective. All articles will be posted here on