Achieve Early Financial Stability Using Simple-Easy-To-Understand Finance and Economics Principles

Brief Background and Basics Principles

Young people have for a long time desired to be successful, mostly in areas that involve financial stability

This could be achieved through them understanding how significant early savings and investments can go a long way towards attaining financial freedom. 

Savings could be defined as any extra money left after removing all expenses from one’s income, this extra cash is mostly put aside for a desired purpose in the future.

Investments on the other hand are financial activities of a specified amount of money that seeks to gain more value in the future.

They involve a wide range of calculated risks that investors can choose from, depending on their personalities, risk tolerance, and other factors.

Different Types of Investments and Savings

Once one has decided that they want to take part in savings and investments then it is key that they know the different types of investments and savings

A great number of people do not know how money really works, learning and understanding this is key.

The value of money today is not the same value of the same amount in the future, this is called the time value of money. 

In this example, a 5% interest rate on $100 (present) would add up to $105 in a year’s time

On the other hand, $100 in one year, is worth $95.25 (present). 

We clearly see how crucial time is when it comes to money, this is one of the most important principles of money.

Allowing money to gain more money from the interest that it earns is defined as compounding, and is how most rich people became and continue to be rich. 

One can also set aside a defined amount of money for the acquisition of valuable assets. 

This should be clearly thought through because it should be something that not only has stable value but also the ability to increase its potential.

This could include; 

  • LandThis could be seen as a long-term asset where one could hold it for appreciation purposes. Where the value of the land increases in value over a period of time, and they decide to sell it, making profit on the difference.
  • Apartments or housesOne of the best ways to do this, especially if one has a good credit rating score, is to acquire a mortgage from a reputable bank to purchase an apartment. One could then rent out the apartment and use the passive rent to pay out the mortgage. One can do this on multiple properties.
  • Company sharesCompanies that are established enough normally go public so as to allow the general public to invest in them. This normally happens through an IPO (Initial Public Offering). Thereafter, investors would then be able to invest in the companies through the stock exchange that they are listed on by buying and selling of the shares. One would then make money through capital gains, which is the positive increase in value of a stock. 

How to Use Your Current Situation to Start

It is human nature to think that certain things are reserved to and for certain people and that they cannot be part of. 

This also includes beliefs, for example where one says that they earn too little to be able to save, or that they are responsible for so many financial obligations when it comes to expenses that they have nothing left for savings and investments. 

This is just a mere perception and limits that one puts against themselves.

Savings could be as little as 1$, so technically if one would just be able to take some time and re-evaluate what their cash inflows and outflows are, then they would definitely get that extra $1, and a lot more. 

This can be clearly achieved by the awareness of how to define basic needs to luxurious needs, “are you buying something because you really need it or you just want it?”. 

Some of the reasons that people spend on things they don’t really need include; just to feel good, credit (From banks) makes it easy, and ignorance of follow ups on what happens in the banks accounts due to these expenses. 

People tend to buy things they don’t really need because they want to boost their self esteem in that it will make them more acceptable, but is this really true?. 

Some people overspend just to try and be part of the whole “group”, peer pressure being the driving force, they want to get something because a friend has it.

On the other hand, people should just start where they are, with what they have, considering the current boom in technology and availability of information, the least one could do is invest in learning and gaining new skills.

One could also reach out to people who are in their specific fields of interest and ask them specific questions in regards to the fields and interests. 

This could result in mentorship instances of people leading and showing you the way. 

Having a mentor is one of the biggest attributes to success.

Fear also contributes to one’s inability to take actions on certain matters, understanding that fear are just huddles that we create mentally will enable one to be able to overcome them.

This is mostly uncomfortable, but it is worth it. Challenge yourself to go for it.

Using Jobs and Careers Effectively

The greater population go into their jobs and careers with the wrong motivation and purpose.

Going to work just because you want to be able to pay rent, or just support your family, or pay mortgage, or just not to be unemployed, all these are wrong motives, and are some of the biggest factors that contribute to financial problems.

People should understand how important it is to find one’s passion and then finding something that will pay you to do it, as the famous quote by Confucius, “Choose a job you love and you will never have to work a day in your life”. 

This in turn will enable one to gain massive experience and be a guru at that specific field. 

In the long run, one explores their full potential while being able to earn money, and also be involved in interactions with different people and expanding their networks.

Being able to use networks is of the biggest advantage that one could ever get in the career elevation path. 

These are people that you meet along your line of work that will impact you positively in different areas and help you grow.

Spending and Use of Acquired Wealth

Once an individual is able to figure out what works for them in terms of savings and investments and they are able to acquire a significant amount of returns that can be classified as wealth, then it is important that they also know how to use those returns. 

As seen earlier in the concept of compounding, retained earnings is a key element that is similar to that, where an individual re-invests the acquired wealth back to a business or specific investment, this way, money works for you.

Most wealthy people also spend most of their investments in companies, through either by acquiring a certain percentage of a company or buying the whole company. They also invest a lot in top management who run the companies for them.

Most companies have CSR projects where they give back a certain portion of their profits to the community through empowering projects.

One could also donate heavily into research such as in the medical field and eduction, as seen with Bill Gates’ and His Wife Melinda Gates’ foundation named Bill & Melinda Gates Foundation.

On the hand we have individual goals and family wellness, it is a great honor to be able to give back and support one’s family, and community at large

This way you are able to grow with people, as the saying goes, “If you want to go fast, go alone. If you want to go far, go with people”. 

Following these simple patterns, one would have achieved, to some extent, a higher level of success.


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