My initial goal when I started saving was to save enough money that could sustain my lifestyle in my later years. In those later years, I would start withdrawing the savings to sustain my lifestyle. I later learned that this was not a very good approach and that it is almost similar to burying the money and returning for it at retirement.
Instead, I should be consistently putting the money to work in a manner that allows it to grow, not only from my contributions, but also from its performance. If I get that right, then I may be able to live off of the returns of the savings’ performance instead of withdrawing it. This means I may never have to touch the core of my contributions.
Realizing this, I started paying attention to the annual return on my savings and therefore tried to exhaust all other options that I deemed safe enough for me. These were initially simple things such as High Interest Saving, Certificate of Deposits (CD)’s, US Treasury and Money Market accounts.
After becoming comfortable with what my money was doing in those vehicles, I gently moved on to what seemed like the logical next step, and that is investing as I mentioned here. It was not a very easy transition, because I had to understand just how much money I was willing to put at risk. While moving on to investing was a necessary step for me, it may not be for most people.
We should view our savings as instruments that can produce income for us in the future, and maybe even allow us to retire early without worrying about being dragged back into to the workforce.