Get Smart With Money | Money Talks: How To Grow Your Money

1. Spend 💸

First, we spend the money we earn. This option is inevitable. We have to spend money to survive. We need a place to live, food for our bellies, clothes to keep warm, entertainment, shopping and giving. A sizable portion of our income goes to spending and there’s nothing wrong with that.

2. Save

Second, we save. This involves taking a portion of our income and setting it aside for future use. Future use could be a month from now, a year from now or even 30 years from now for retirement. This is money you put aside for future needs. Savings is good. It serves as a foundation for building wealth. It instills the discipline and culture of saving for the rainy day. For those times when the unexpected happens. 

3. Invest 📈

Third, we invest. Savings is good but investing is much more freaking awesome and better. Savings is like you driving a beat up junk car while investing is like you driving the latest Tesla X. Let me explain what I mean

Saving vs. Investing Explained

So let’s assume you decide to save the $1,000. You put it in your bank account, or you put it under your bed or your stocks drawer. Well, if you come back 10 years from now, that money will still be sitting right there in your account, or underneath your mattress or drawer as the case may be. The money will be there staring at you. There is absolutely no opportunity for growth. It’s just stagnant.

Money hates being stagnant, else it decays as it loses its purchasing power due to inflation.

You realize that the $1,000 in 10 years is no longer as valuable as it was 10 yrs ago. The same cup of coffee that used to cost $2 is now $4.50. So you cannot buy as many things.

So instead of letting the money just sit there stagnant in a savings account,  the idea is to invest it and let the money grow and work for you. If you are going to save the money anyways, is it not better to invest it and give it an opportunity to grow by purchasing assets. We do this by buying the stocks of companies that would grow in the future. 

For example, let’s assume you buy a share of Tesla today for $300 and in 5 years, the same stock is now valued for $1500 and you sell. That would be a good return right. Capital gains of $1,200. The same applies to real estate. This is a great asset for investing but it’s quite capital intensive. You buy a piece of property for a certain amount and later in the future you sell for a higher price.

However, the stock market is not as capital intensive as real estate investing, you can even start investing with as little as $100. The idea is to buy today for a low and sell tomorrow for a higher price. So as a young investor, you look around to see which companies can I buy today that will generate future growth and prospects.