How to Grow Your Money
To grow your money is not magical. When it comes to making your money grow, there are no magic secrets. If there were, you surely would not be able to Google them and read them online, but you still can make your money grow if you follow some tried-and-true strategies.
In the constantly changing world of business, the key to investing success isn’t identifying companies that are growing the absolute fastest. Rather, it’s “determining the competitive advantage of any given company and, above all, the durability of that advantage,” Warren Buffett famously wrote.
#1 How to Grow Your Money | Think Rich:
One way to make your money grow is to make more money. The wealthy have a certain mindset. They are not motivated by fear and scarcity; they do not finish all of the food on their plate because there are starving people on Earth. They focus instead on what they can contribute to the world, and they study other multimillionaires to find out what motivates them. Multimillionaires also think about time differently. They buy it, not sell it. They work only on what they are good at and hire people to do chores that take time from their goals.
#2 How to Grow Your Money | Higher Interest Rates:
Instead of putting your money into the most convenient savings account, shop around for a better deal. There are several banks today, offline and online. Go for the one with a higher interest rate. If you are willing to lock up your money for a certain time, typically six months to five years, you can put your money into a certificate of deposit; CDs or Fixed Deposit as we understand it down here, they have higher yields than savings accounts.
#3 How to Grow Your Money | Invest:
Start investing. Once you get some money saved, you can invest it. Diversify your investments by putting some money in bonds, some in stocks and some in real estate. Bach, a financial expert says a multipronged approach doubles your money every five to seven years. Don’t fall for get-rich-quick schemes that seem too good to be true, they are often scams. There are several Ponzi schemes that have been scams in recent history, and lots of dishonest persons out there. If your goal is to make money, steer clear of fast-talking dealmakers.
#4 How to Grow Your Money | Use rewards credit cards:
If you must use a credit card, use one that offers cash back or rewards. Then, you’re earning cash or equivalents without effort.
#5 How to Grow Your Money | Real growth:
How will real growth of just 6% per year fund your retirement? It works through the phenomenon called compounding. “Say you deposit the price of a loaf of bread today into an investment account that grows at 5% per annum in real terms (i e 6% pa net ofa 1% pa fee). After 15 years, your investment should pay for two loaves of bread and after 40 years seven loaves”. This is the effect of compounding, earning a return on your return. The longer you invest, the stronger the compounding effect becomes. Using the above example, it takes about 23 years to grow one loaf into three, a further 10 years to grow three loaves into five and then a mere seven years to grow five loaves into seven.
The key lesson here is that you should start saving and investing as early as possible, to benefit from the strong compounding effect at the end of a long investment term. “If you had saved your money in the bank, earning a 1% real return per year, you would only be able to buy a loaf and a half in 45 years’ time. In other words, even if you save diligently over your entire working life, investing in “a low-risk asset class” could curtail your standard of living in retirement by as much as 80%. That is a much bigger risk than exposing your money to the share market over the long term.