I'm a long way from financial freedom, but I've noticed a change since I started my switch from saving to investing. There are many definitions for saving and investing so I'll give you my own.
Saving is putting money away without earning interest or earning significantly less than inflation. Saving for me is Emergency fund money or any other money in cash or anything that pays less than 3%. Why 3%? Current inflation here is about 4.7% (officially). Your typical bank savings account, money market account and certificate of deposit would be savings. Savings are important. If you have no savings you need to save first and then you can invest.
Investing for me is putting money in stocks, bonds, and any other investment that earns near, at, or above inflation in any case it should earn at least 3% to keep up with "ideal inflation".
Anyway, I had paid off my credit card in 2011 (My previous savings got spent during the recession), and saved up my emergency savings for 4 month's expenses and then I started researching and found how I wanted to invest in a mix of stocks and direct bond purchases earning 4-6%. I put 3/4 of my emergency funds into those so I'm down to one month of expenses in cash. I'll probably keep it like that for the near future since my cash earns no interest in the bank. I just keep that there as I might need it tomorrow/real emergency money. The refrigerator could stop working or something else might come up. Still I hate to see the purchasing power drop due to inflation. In fact yesterday, I noticed that two things I enjoy went up by one peso each.
Yesterday, I got the first bank statement for my new bank account that includes investments. Although only a small part of it was new money from last month's income, I felt just as good as if I had bought a pizza or new shoes.
Every Thursday when I see the new cetes and bonds assigned to my Cetesdirecto account, I get a little excited that I made another small step closer to my goal of financial freedom. New shoes wear out, and pizza gets eaten, but investments make you more money.
I've started to ask myself how many 20 or 30 year bonds I'd need to buy a pizza every month with interest or something else I enjoy. I suppose once I start getting dividends I'll do the same thing.
If you haven't yet, start saving so you can start investing for your future. Even if you don't want to retire early, you'll find uses for that new investment income. Saving isn't fun, but investing feels great!
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