Manage you money well to become rich

QUITE often you must have heard people narrating a famous quote stating - “the rich get richer and the poor get poorer.”

In many corners of the world there is a wide ranging belief that it is blessing to be rich and a curse to be poor. However there is a need to look beyond this belief of blessing and curse in order to prove our today’s point.When I say “money begets money”, what basically does it mean?

If we simply take the dictionary meaning of word ‘beget’ it indicates towards producing or giving birth. So in literal sense the phrase – ‘money begets money’ would mean that if you have money it can produce or make more money, provided you make the best use of it.

And this is where most of us default in our life, as we often fail to recognize the ‘time value of money’. In simple terms ‘time value of money’ is the value of money figuring in a given amount of interest earned over a period of time.

For example, 100 dollars of today’s money invested for one year and earning 5 percent interest will be worth 105 dollars after one year. Therefore, 100 dollars paid now or 105 dollars paid exactly one year from now both have the same value to the recipient who assumes 5 percent interest. Using time value of money terminology, 100 dollars invested for one year at 5 percent interest has a future value of 105 dollars.

The above stated example drives us to a fact that on one side if we keep USD 100 in the cupboard at our home and on another side deposit USD 100 with a bank at fixed rate of interest [say 5%], then at the end of first year the money which was deposited into the Bank has produced an extra 5 dollars, whereas the money kept in the cupboard has remained the same.

This gives us our first important lesson that ‘never keep your money idle’, but invest it appropriately so that it can generate some additional money for you over a period of time. This simple corollary provides an answer as to why the rich seems to be getting richer and the poor getting poorer.

This is because money or at least possession of it opens up many investment opportunities that may not be available to all. Take for example the various investment offerings available. Ready cash invested would yield more than the loaned cash since there will be no principal and interest payouts to deal with.
 

The invested money is able to earn more because whatever is earned is a clear profit. That is why those who have free cash or cash that is free to be placed even on speculative transactions have more choices. Rich people are not necessarily more hardworking or wise, but only better at availing the right investment opportunities.

The second important lesson which we can derive out of our today’s analysis is that – “as far as possible avoid taking unnecessary loans”, because servicing of a loan kills one’s money producing capabilities.

There is one cruel reality about the borrowed money: universally it is a proven fact that interest payable on borrowed money is normally at a higher rate than the one earned on our deposits. Thus clear your loans first by using your disposable income then commence to save and not the other way round.

First of all, you have to understand that you can use money as a means to accumulate wealth. You can grow your money by investing it wisely, saving separately, managing your assets, and having patience.

If you do these four things correctly, your goals can be met and then you would be on your way to reaching your highest potential. Let us now attempt to elaborate on these four important pillars of money management: Firstly, “invest wisely” - whether you work for a corporation, large or small, or manage your own business, there are investment vehicles all around you that are designed to maximize the potential earnings from the amount you invest and can make your money grow manifold over time.

The next one takes us to: “save separately” - you should always have one or more personal savings accounts that are kept independent of all other funds.

These accounts may not accrue maximum interest, but they are safe and they can save and make you money in the long run. Third one leads us to: “manage your assets effectively” - most people can’t afford to hire money managers, but that should not deter you.

The average person, just like you and me, manages their money without outside help, and they do it quite efficiently. And finally: “have some patience” - patience is the key to all investment opportunities. If you put your money in the right investment vehicle, it will learn to drive itself and you can patiently sit back and watch it grow.

So if you are ready to practice the above stated principles then our today’s dictum – ‘money begets money’ will turn out to be true for you.

Some people have dreams and no goals. Dreams are fine for those who live in a world of fantasy but goals are for those who want financial well being and plan to make it their reality. The growth of your money will depend on what your goals are and how you treat your money and your investments.

There is nothing wrong with dreaming, so let the dreamers dream on. But for those who are realistic about making money and becoming financially well off, you have to set realistic goals and work towards meeting your goals.

Some even say that having money is not the only way to get more money, but a positive attitude and strong determination is required. It seems that all of these make sense yet somehow hard to believe. But one thing seems clear, the only way to truly understand it is to take a journey ... a journey to financial freedom. Cheers!!!