Opinion – From Grain to Grain: Understand the two ways I applied to increase my saving capacity

Increasing your savings capacity is a critical element in taking a better path to financial independence. There are only two ways to increase this savings. With a little luck and a lot of discipline, I applied both ways for myself during my career and you can too.

I started working in the financial market as an employee in January 1998. I was 24 years old and had just graduated from the Electrical Engineering course at Unicamp.

At that time, the Brazilian capital market did not pay as it does today. I started earning an amount equivalent to R$ 3 thousand at today’s values.

With my expenses at that time, that amount was already enough to save about 10%. I lived in a rented apartment with three friends and that was the main expense. It represented a third of the total amount.

It didn’t take long for me to realize that there were only two ways to increase this savings.

Either I cut costs or increased revenue. However, both seemed unlikely at the moment. I could even cut some leisure expenses and live in a cheaper place, but I believed they were essential.

I understand when many approach that they cannot cut expenses, as they are all really essential.

Cutting expenses is not easy, but there is something simpler that is possible to accomplish.

Easier than cutting expenses is not raising them or at least controlling them. I adopt this habit to this day.

Of course, in these 25 years I have increased my expenses.

However, I believe I have good control over expenses. I’ll give you a recent example that I have on record. In 2009, my rent expense was R$3,000. I have moved property three times since then and today I pay R$3,300.

In the last 14 years, inflation, as measured by the IPCA, was 123%. However, my main expense to date, which is rent, went up by only 10%.

Throughout my adult life, I’ve controlled my spending so that most of the increases I’ve had in my income have gone into financial investing.

This is the first habit you should try to adopt to increase your savings capacity.

The second way to increase savings only came to mind in the second year of work.

In the first year of work, I started a postgraduate course. It was by taking the course and getting to know a little more about the teachers’ lives that I understood what I should do.

I should have an extra income in addition to my salary.

I copied the idea from my graduate school professors. Almost all worked during the day and taught at night.

I understood that I needed to have a certification to be recognized and thus be able to earn money as a teacher.

In less than three years later I was already teaching. A few years later and I was able to double my salary with the resources of the classes. However, my expenses have not gone up anywhere near this proportion of the increase in earnings.

There is no doubt that this requires a lot of effort and discipline. I can say today that I would do it all over again and better. With the knowledge I have, I would have cut those superfluous expenses.

Michael Viriato is an investment advisor and founding partner of Investor House.

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Book: The Journey to Financial Independence

summary

Introduction
Understand how you will achieve your financial independence
Living on an income is the last step on the journey to financial independence
These are the biggest questions about the journey to independence

Chapter 1 Construction of the plan
The first step in building the blueprint for financial independence
How to define the rate of return in your plan for independence?
Find out what assets you need to achieve your financial independence
On your journey to independence, don’t overlook the importance of this factor.
Understand the two ways I applied to increase my savings capacity