Money

36-year-old retiree: Saving money doesn't get you rich—here's what does

In 2014, Steve and Courtney Adcock decided to get serious about their savings. They cut back on their day-to-day expenses, downsized and started setting aside 70 percent of their combined income.

In December 2016, Steve left his career in information technology at age 35. Courtney, 32, joined him in early retirement in April 2017.

But, to be clear, "just saving money doesn't get you rich," Steve tells CNBC Make It. Nor does it necessarily enable early retirement.

Steve and Courtney Adcock retired in their 30s
Courtesy of Steve Adcock
Steve and Courtney Adcock retired in their 30s

"Ordering water instead of soda or beer at restaurants might save you a few hundred over the course of a year. But let's face it: A few hundred isn't life-changing money," the early retiree writes on his blog. "Don't get me wrong, saving money is great. It's wonderful. It all helps. It's just not the magic sauce to early retirement."

Rather, the "magic sauce" is investing, and making your money work for you.

"Instead of keeping your savings in your bank account, which is definitely better than nothing, put that money in the market," Steve tells CNBC Make It. "Over the long run, that compound interest is going to add up."

Compounding makes a sum grow at a faster rate than simple interest, because in addition to earning returns on the money you invest, you also earn returns on those returns over time. It causes your wealth to snowball over time and means that you don't have to save as much to reach your financial goals.

If you want to put your money to work, the simplest starting point is to invest in your employer's 401(k) plan, a tax-advantaged retirement savings account or other retirement savings account, such as a Roth IRA or traditional IRA.

You can also research low-cost index funds, which Warren Buffett recommends, and online investment platforms known as robo-advisors.

The Adcocks prefer target date retirement funds. "We just throw money into our brokerage account and literally forget it," writes Steve. "There's no secret sauce to getting rich in the market. Besides time. You gotta give it time."

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