The 1 bad, 1 neutral, and 1 good thing you can do with your money...

Originally Posted by Dien Rice

I have some friends... And it sometimes makes me sad...

Why?

These are people who haven't put aside any money for a rainy day.

When they get money, they spend it on the things they enjoy.

Don't get me wrong - they are really great people...

The problem comes... when the flow of money starts slowing down!

For example, one of my friends lost his job about a year ago. He just recently got another one. But during that year in which he didn't have a job, he was really struggling...

Another friend of mine got some inheritance. However, two years later, 90% of it is all gone. I won't go into details of what he did with it, but 90% was all wasted. He has nothing - literally nothing - to show for that 90%. (Fortunately, he did invest 10% of it, which will pay off for him in the long run, but he could have done much better.)

What could they have done better?

What it comes down to is a kind of financial "knowhow"...

Did you know that, when you get money, there are three things you can do with it?

You can save it, you can spend it, or you can invest it.

What does that mean?

Saving it means hanging on to it, not spending it, but not making any extra money with it either.

Spending it means spending the money in ways where it effectively "disappears."

One common way is buying things that will decrease in value. For example, if you win the lottery tomorrow and immediately go out and buy a new Alfa Romeo sports car... As soon as you drive it off the lot, your Alfa Romeo will start decreasing in value! If you try to sell it a few years later, you won't be able to get anything near what you paid for it. You will have lost that money!

Investing your money, on the other hand, means putting it somewhere where the money will grow.

Now, when people think of investing, they often think of stocks and real estate property. However, you can also invest in your own business.

For example, buying "chattel" and reselling it for a profit is a kind of investment (what Gordon Alexander calls "chatteling"). You can keep doing this, and grow your money...!

Are there other ways?

I'd say you can also "invest" it in education. If that education means you'll end up making more money in the end, I see that as a kind of financial investment, too...!

(I've easily "invested" tens of thousands of dollars over the years in my business education - through books, newsletters, courses, and so on... And in my opinion, it's paid off... )

Anyhow, i just wanted to share those thoughts... I hate to see people struggle unnecessarily, when those people don't have to, if they just looked after their existing money a little bit better...

What are you doing with your money?

Best wishes,

Dien

Dien,

As a person in the financial arena for years upon years, I will say:

1) your article is spot on
2) people don't think about a rainy day
3) every civilized country has a method for people to save that will insure said same people a living amount when they get old
4) many people think they know more about saving than they really know
5) advice in this field is all over the place. One of the worst pieces of advice I ever heard came out of the mouth of a syndicated financial guru. This is a guy with millions of followers. One of the best pieces of advice I ever heard came out of the mouth of a guy with no syndicated radio show. Who do you think the people will follow?
6) we need articles like your post to keep people thinking about their money
7) that rainy day you mentioned could be surviving a heart attack, stroke or cancer and not being able to work. Ouch!

OK, I'm off my soap box. Thanks for a money reminder.