A penny saved is a penny earned, but over a period of time, a penny not invested is a penny wasted!
We all have certain goals, don’t we? Certain dreams and desires for which we work harder with each passing day. Trying to earn a little more to accomplish them faster. But, just earning more money do all the work? Absolutely, no.
Earnings coupled with savings is the only way out. The more you earn, the more you save and the less you earn, the more you should save. The habit of saving at the start of the month, that is when income hits your bank account, compared to saving money at the end of the month, that is, the money left after spending can change your life drastically.
You can spend worry-free if you go by the former than the latter. Going with the latter, at times could result in no savings for a particular month. That’s because, we, generally don’t think that hard of how many cappuccinos we’ve bought this month before buying our favourite one. A clear sign of reckless spending.
Savings and only savings is not going to help.
Imagine, you want to go for higher education. You calculated the total amount required for the same and started saving an ‘X’ amount monthly. There is a clear timeline in front of you to reach the amount desired. Let us suppose that it is going to take 2 years to accumulate the desired amount.
You’ve been patiently keeping money aside every month. At the end of 2 years, the fees rose and you again fell short of money. There is a possibility of the value of your currency dropping drastically!
What can be done to avoid such scenarios to some extent?
How happy will you be if someone contributes to your goal! That someone is no one else but your money. Yes, your money can make more money for you.
All you have to do is convert your savings into investments. The early you save, the faster it takes to get returns on investments! The best part is you take the returns and invest them again. This gives you more money month on month. That’s the power of compounding. If you delay your savings even by a month that delays your investment and thereby you lose out on the returns of that one month. Time lost once never comes again.
Time value of money plays an important role. Before making an investment it is very important to calculate the future value of money. This should be done by taking into consideration the rate of inflation. Higher inflation lowers the value of money. The rate of return on investment should be higher than the rate of inflation to fetch profits.
It clearly makes no sense to earn less and live poorly and to earn more and still live poorly due to inflation! Converting savings into investments is the key to defeating inflation. Most importantly early savings and wise investment decisions!
“Early to invest and early to retire, makes a man happy, wealthy and achieve F.I.R.E.”
(FIRE — Financial Independence, Retire Early)