Why do you invest? Is it just because you want your money to grow? And then what next? Buy whatever you want? And then what next? Become the prettiest and handsomest financially-broken heartthrob in your neighborhood?
Usually, and based on my experience, this post-Christmas month of January has the most number of people getting interested about growing their money. Many ask around online forums, radio or TV shows, and even in news columns about where to keep their money and take profit more than what their money usually get from the bank.
This is probably because most people would always want to have a good start of their lives for the year.
But why should we invest? In our teaching sessions, we always tell our participants that the reason and the purpose for investing is to achieve financial freedom.
Yes, we always say that we should invest for a goal. A specific one for each type of investment. But ultimately, we should invest because we want to live the lifestyle that we want. A life that do not worry about paying bills and making both ends meet.
Having financial freedom means being able to retire, realizing your dreams, and enjoying time doing things you want to do.
How Should I Grow My Money?
Many of us work hard, burn our fats, grow pimples at work on OT (Over-“Tawad”, OThanks, O-TY, etc.) to aspire financial freedom. Blood, sweat, tears, cholesterol.
But here’s the thing; you need not work hard every day all the days of your life for every cent, or peso, or riyal, or dollar (name the currency of the country where you are working) in order to become financially free. You should know that it is very important to get your money work and start growing for you instead.
But before putting your money in any vehicle or instrument that promise to work for you, it’s very crucial that you as a future investor should also invest in learning about the basics of business and investments.
You may not be an accounting or finance or business course graduate but you need to know and understand the following terminologies related to investments and achieving financial freedom.
• CASH FLOW is the difference between the money you have available at the beginning and end of an accounting period.
o Positive cash flow: Cash coming in is greater than cash going out.
o Negative cash flow: Cash going out is greater than cash coming in.
o Breakeven cash flow: Cash coming in and cash going out are the same.
• NET WORTH equals Assets minus Liabilities.
• ASSET is any item of economic value owned by a person or corporation
o Tangible assets include gold, real estate, stocks.
o Intangible assets are things you own that have value but are not physical in nature. EXAMPLES include copyrights, trademarks, brand recognition, and community goodwill.
• LIABILITY is a loan and/or other obligation you have to pay.
• RETURN ON INVESTMENT (ROI). This performance measure helps investors compare the return offered by one investment to returns on other investments. ROI is calculated by dividing an investment’s financial yield by its cost. The result is expressed as a percentage or ratio.
*Definitions were provided by our partner National Financial Educators Council in the U.S.
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