Money doesn’t need to be complicated. But in dealing with it, you may have picked up some common patterns that seem to be part of the prevailing culture.
Ideas like you shouldn’t be “too greedy”. Or that you should be so grateful for what you have that you should just count your blessings. So it would be nice to have just a bit more money.
While being appreciative of where you are is a solid practice for your wellbeing, there is really no status that can’t be improved.
It’s a simple shift that can help put things into perspective. After all, if you are able to improve (at anything) why shouldn’t you?
With that in mind, let’s look at some ways you could get the ball rolling on your way to build wealth and make a better living for yourself and those around you.
Income - improve and diversify
How many people do you know whose sole source of income is their day jobs?
Whether by being in a traditional employment relationship or providing services to multiple entities as a freelancer, chances are that a big portion of your immediate contacts rely on only one way to bring money in.
However, there are several ways for you to spend that money.
So why not add income streams? It can seem daunting at first, but you don’t need to make everything happen overnight.
Be it by running a business, taking up a side gig or monetizing an existing hobby, small steps can go a long way. And it can act as a safety net should one of those happen to face some problems. After all, these are uncertain times, and unemployment rates should not be ignored.
Another way to go about it is by looking at the level of income each stream is able to produce. Now you can ask yourself “Is this the best I can do?”.
Getting more originates in asking for more. Getting a raise or a better quote on your work won’t happen unless you work toward that. Just make sure you can back up why you are worth more. And if you don’t yet, work toward it.
Inflation - take it into account
Numbers can be tricky if you are not careful.
One of those ever-changing numbers is the inflation rate.
You may have noticed that as the years go by, goods and services tend to get generally more expensive (if nothing else changes, that is - innovation and technology can make it that certain categories become more accessible).
So if prices tend to go up, what happens when your money is not going anywhere? Given enough time, your purchasing power can slowly fade away.
With today’s interest rates being at historical lows, this is not a theoretical concern.
Which is why investing is an important component of building up your financial future.
It may require taking on some risk, but if the alternative is doing nothing, then you are already paying the cost.
Compound interest - the eighth wonder of the world
We are not the ones that said so - Einstein did.
And in that small expression lies another great advantage when it comes to investing.
Let’s look into it:
Say that you invest €2,000 at a projected 2.5% interest rate.
After one year, you can expect that investment to provide a €50 return.
What about in the following year?
If no movements are made, this time you can expect €51.25, since the amount generating interest is now bigger than it was at first.
Just look at these projections:
Year 1 - €2,050
Year 2 - €2,101.25
Year 5 - €2,262.82
Year 25 - €3,707.89
Year 50 - €6,874.22
Year 75 - €12,744.41
Year 100 - €23,627.43
Now, look at the difference between years 25 and 50; and between years 75 and 100.
We are looking at two 25-year periods. But while the first added €3,166.33, the second generated €10,883.02.
So don’t underestimate the power of time.
The key - big picture, small steps
Remember - thinking big doesn’t mean taking on everything at once.
That is the beauty of small steps - they also compound.
So don’t limit yourself when it is time to plan for what you really want. By implementing small changes gradually, the results can really surprise you.
Know someone that might want to build wealth as well? Sharing this article can be the first step they need!