We always hear: “Don’t spend your money now, save it!” But do you know there is an even more efficient way to get a hold of money?
00:00 In this video today, I’ll go through why you should understand the difference
between saving your money and Investing your money.
01:51 What is Saving Money Good For?
Saving money is good, but it is always meant for the short term, so within a year.
Money can’t grow fast by itself within a year. So if you want to be saving up some money, just leave it on your bank account.
Now, if you would like to have some advice on saving. I always have different purposes for the money I receive and also for saving my money.
The first thing is, do I have $1000 on my bank account? Having this will give me the ability to pay off anything important I need to.
The next thing I always do is pay off any of my debts.
It’s not that all my remaining money will go into paying debts, but I have a strategy. I will apply either the snowball effect, which is paying off the smallest debts that I have. Or the avalanche effect, which is paying off the debts that has the highest interest rates.
The third thing is, I always check if there is enough money in my emergency fund. This is what I do each and every month. Just checking if I have 3 months of expenses in that fund.
Saving money is in the end the reason for HAVING money.
Whereas investing money is purely about GROWING money.
03:58 Why Poor People Don’t Invest and Just Stick to Their Regular Habits.
The steps I’ve shown you just now are done by so many. Most of us do this process unconsciously, but the investments stop there. Because most people, about 65%, have no idea how to invest money in any other way.
I’ve seen so many people around me, who just prefer to do the things they’ve always done, to get the results they’ve always gotten. And just rely on retirement or pension and let other people and organizations take care of their money of their own future.
06:32 Why Rich People Understand that Investing is The Way to Go.
Like I mentioned before, saving is just having the money, whereas investing money is all about growing money. The whole purpose of investing money, is to grow it over time.
Let’s pretend that you’ve invested $2000 in a company in 2019. Now, in 2021, your $2000 would have been worth about $15.000. That’s how much they’ve grown!
Now of course, we do not have the power to look into the future, of which stocks will perform well over time, but we can research different kinds of companies which perform well, right now, and what they might possibly do in the near future.
08:16 Bonus: How You Can Grow Your Money Faster.
Each month, when you check your checking account, does it have the $1000 to spend on daily things? Yes? Next!
Are you paying off your debts, snowball effect or avalanche effect?
Yes? Next!
Is your emergency fund full and still ready to go, whenever an emergency happens?
Yes? Great!
Force yourself to invest money so that your money can grow for the long term.
And you may only start with $500 per month, but as long as you keep investing money, some of your stocks will be paying you out and giving you good returns. Before you know it, your monthly investments have grown to $1000 per month! As long as you are consistent of course.
