“Money can’t buy your Health or Relationships but it can affect your Health, Relationships, Lifestyle and Life experiences.”
1. Increase your Income
“An average millionaire has seven sources of Income.”
Start a side hustle, learn new skills, ask for a raise (ideally in every 2 years), sell courses/services online with the internet you can work from anywhere and for anyone take, the advantage of currency differences.
Specialization is the only way to get the best job in your industry. Be the best (among the top 10 – 20%) in your field and you’ll never have to worry about the job again.
2. Decrease your expenses
“If your definition of happiness is materialistic, then you got a problem.”
Go ahead and review your last month’s bank statement – You ll get the idea where your money is going. For most of us it is mostly Rent, Transportation, Food and Entertainment.
Your expenses are just the choices of your lifestyle. You can save big by moving to a smaller house or sharing your apartment, by moving closer to your work or by getting a remote job. If you are eating outside 10 times, make it 5.
Think of your spending in terms of time – how much hours/days/year you have to work to buy that thing. For example – to buy a luxury car, you ll have to work for 4-5 years and if you get it financed then consider 6-7 years with interests. What if I tell you, your money would have been doubled in 10 years with 7% compound interest, which is very easy to get even with Fixed deposits.
What would you choose? 7 years of torture maintaining a luxury vehicle with interests which you can hardly afford or double your money in 10 years.
Master the compound interest with the rule of 72. Which is “If you divide 72 by the interest number, approximately that is the time (in years) when your original investment will be doubled.
For example – if you are getting 7% interest, your original amount will be doubled in roughly 10 years (72/7).
3. Invest Early and Invest often
“If you are not making any decisions on your retirement, you are still making a decision to work longer.”
As Mentioned above, to get the full benefit of compound interest you have to start early. If you have any debt pay that first. In case of multiple loans start with the one which has the highest interest rate.
Don’t get addicted to your Credit card. Mark Cuban and Warren Buffet’s best personal finance advice is to stay away from Credit cards. Using a credit card (unless you don’t have that much of cash) means actually you can’t afford that thing.
After clearing all your debts, make an emergency fund. An emergency fund should ideally be your 6 months of expenses. As the name suggest this is for emergency, unless you are bankrupt, jobless, homeless or someone is dying – don’t touch it.
Next start contributing to your retirement accounts (EPF, ETF and Superannuation). Not only these schemes will save your taxes but also your final amount will be tax free. Contribute the maximum amount you can afford.
Then you can start with Deposits and bonds, these are low risk investments. Don’t take ‘High Risk, Hight Reward’ mantra rationally. Don’t invest all your net worth in crypto to get 1000% in 6 months. Mutual Funds and Stocks make sense follow after Deposits.
Stocks give the best return if you can pick the right one. Picking stocks is a different skill altogether but it can be learned. If you don’t have the time can give your money to mutual funds where experts will invest on your behalf. Try to invest some percent of your income every month, make it a habit and most importantly have the patience for a long-term return.
‘Get Rich Slow’
“Live below your means, Save, Invest and let compound interest do the magic.”
Cutting expenses are way easier than increasing income. In order to get the most out of your investment don’t take out the interest amount from your investment until you reach the target amount.
The easiest way to get rich is ‘Get Rich Slow’ if someone is selling you something which says ‘Get Rich in months’ run away and close the doors, only that person will get rich off you in months.
Live below your means, decrease your Expenses and increase your Income, Invest often and Invest early.
Cover image from: moneycrashers.com