All Financial Wisdom
The 3 basic numbers to know if you want to be rich
No. There is no magic formula or trick, but if you take these three figures into account for the rest of your life, your finances could change considerably.
There are many people who maintain the false belief that being a millionaire can be achieved easily and simply, when behind the great emporiums or famous people hides a history of sacrifice and patience. Well, this may not be the case with those who are heirs to their wealth, or who are lucky enough to win the lottery.
Perhaps that is why people want to have investments that double or triple their money without having to make more effort or consider businesses that can not always be very transparent. Sorry, no shortcuts here.
The following will correspond to you who estimate these three figures to have control of your finances:
Number one: Retirement
The age at which you start saving is extremely important. Two words: Compound interest.
This does not imply that you have to save 10s of thousands of dollars every month, but you will someday grow old and not have the same capacity for work. The advantage is that the earlier you start doing it, the less money you’ll need to grow your money.
But this also implies that you make use of another tool: investing. It is of no use if you start to accumulate money under the mattress, because the idea is to get returns (even if they are minimal).
Number two: Leakage
When you are beginning to feel financially stable and have enough resources and conditions to allow you to be more relaxed, this is where #2 comes into play: your money leaks.
What this means is that many times, in order to have more time or simply for laziness, you begin to delegate a series of tasks that you previously assumed yourself: cleaning your house, gardening, cleaning your car, cooking your food, and so on. Well, they can improve your quality of life, but if you really account for all that this implies for your pocket, you would realize that you are losing money in a very stupid way.
The same thing happens when you start making investments and you have to pay fees to a broker so just to help you increase the value of your money. (However, some fees are reasonable)
The problem with this second issue is that it is “so hidden” that you really are not even aware that it exists. The key is basic: check whether your bank or your financial advisors are really giving you the best rates they can offer.
Number Three: Interest Rates
If you do not have the slightest idea what this is, I’ll explain it as easy as possible so that you begin to understand its importance.
It’s important to know how to choose the right interest rate for everything: your debts, your savings and your investments. Although each situation requires a different analysis, remember that whenever you invest or save, you must ensure that the rate is greater than the annual rate of inflation in order to maintain the value of money over time as well as to make a profit. I won’t go into detail here as you can read up on this here, but the basic idea is that inflation can erode any gains you achieve. It can also make your debt untenable as you end up paying unusually high interest on your credit cards, student loans, mortgage etc…Bottom line, lock in your interest rates while they are low. Also, consider inflation protected securities such as this one(no affiliation by the way).