Keeping your money safe and growing your assets

Ricky

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Disclaimer: This article is for informational purposes only. It is not intended to be financial advice. Seek a duly licensed professional for financial advice.

Risk and return are two sides of the same coin. All the investments you make have a risk of getting affected by outside forces. These outside forces include taxes, politics, and inflation to name a few. The moment you part with your money is the moment you've taken a risk. This absolutely does not mean that you shouldn't invest.

Investing your money involves taking a risk. Risk cannot be avoided, but it can be minimized. When you put in your money without understanding your risk, it is gambling. When you put in your money with a full understanding of your risk, it is investing.

Keeping your money to yourself won't make your wealth grow. You need to use your money in a smart way. Here are a few ways to keep your money safe, avoid losses, and grow your wealth.

Staying debt-free

Taking debts is not a bad thing unless you let them backfire on you. Many big multinational companies around the world survive and thrive on debt. Many poor people have taken loans and made successful businesses out of them. If taking loans were not allowed for poor people, then they would never have got an opportunity to be successful.

Always try to pay your debts so that you don't fall into a debt trap. Whenever you receive your salary, pay yourself first (invest money for your future), pay your debts, and finally, you can use the remaining money for your personal expenditures.

You should recognize the difference between good debt and bad debt. An educational loan is a good debt for you because a good education will give you a good job in the future. Meanwhile, a credit card loan is bad for you because the interest rates on credit cards are usually high and you have to pay a high cost if your fail to clear the dues in time.

Protecting yourself from inflation

Inflation is the situation when the prices start increasing in a particular country. If you keep your money to yourself and inflation occurs, then your money would lose its value. This is because since the prices of all goods increase during inflation, you would be able to buy less from the amount of money you have.

If you save money now and inflation occurs in the future, the value of the money you have been saving for so long will be lost. To avoid this, invest your money into assets that will give you good returns in the future.

Spreading your risk

There is a common saying in the investing world: "Don't put all your eggs in the same basket." If the basket where you put your eggs falls, all the eggs will get destroyed as well. The same case applies when you invest your money. If you put all your money in a particular stock, and if the stock crashes, all your money would go into loss as well.

To avoid this, invest your money into different asset classes. If your money goes into loss by the crash of one asset class, you may be able to recover the amount from another asset class that would give high returns.

Spending in control

Overspending is a big problem that people face when it comes to using their money wisely. It is a bad habit that prevents people from growing their wealth. The world-renowned investor once said that if you keep buying things you don't need, soon you'll end up selling things you need.

Don't misuse your credit card by being extravagant. This is because you have to repay your credit card bill with an interest that will cost you more than what you spend in the current month. Don't buy things you can do without, buy luxury items only after you have excess money lying around in your bank account.

Don't consider insurance as an investment

Investment and insurance are not the same things. Many people have a common misconception that insurance is an investment, but it's not. This is because investment has the potential to give you financial returns in the future. But when you buy insurance, you are basically buying protection. Your money would be given to your nominees in case of your death. Insurance does not have any intentions to give you financial returns.

Don't allow insurance agents to trick you into purchasing schemes that are beneficial for them rather than you. Don't purchase insurance schemes that you do not need. Buy a good insurance plan that would work perfectly for you.

Takeaway

The difference between the rich and the poor is increasing every day. The rich are getting richer and the poor are getting poorer. This is because the rich are more financially literate than the poor. The rich know how to use their money smartly and end up paying less taxes than the poor. The poor works for money their whole life while the rich know how to make their money generate more money.

Thus, having a higher level of financial literacy is one of the first steps that you can take for growing your wealth. A high level of financial literacy enables a person to use their money in a smart way. Some world-renowned books that you can read to enhance your financial literacy are as follows:

  1. Rich Dad Poor Dad by Robert Kiyosaki
  2. Think and Grow Rich by Napoleon Hill
  3. The Millionaire Next Door by Thomas J. Stanley
  4. The Psychology of Money by Morgan Housel

(Disclosure: The links provided above are affiliate links and the author may get a commission if any purchases are made from the links above)

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