Many of my friends borrow money from me, from time to time. It is not like that they earn less than me, or they have a burden of loan on their heads. They run businesses and works in big I.T firms.
Last year my cousin purchased a big car and house. He was able to buy it because the bank gave him a loan. But, after the corona pandemic, he lost his job and end up with no money.
Luckily he got a new job but with less paycheck. Now he is frustrated because he left with no money after paying home and car instalments.
The main reason behind financial breakdown is lack of planning and systematic investment. Our schools and college don’t educate us about personal finance. Lack of financial knowledge is the main reason for the financial breakdown.
1. Build your portfolio
Warren Buffet started investing when he was fifteen. Starting early in the stock market helps you in long term. During my college days, I didn't invest in stocks and lost the golden opportunity to generate wealth by investing.
Building your stock portfolio is the best way to grow your wealth in a parallel way. You can use dollar-cost averaging if you’re trying to invest in SP 500. Share markets give better returns than bank fixed deposits in the longer run.
My friend used his stocks investments to build his house entire house without taking a mortgage. He started investing at age of 17 and made massive returns in recent years.
I invest in the stock market not become a millionaire, but I can build a good luxurious house, after 20 years. This sounds crazy, but my goal is fixed and I am continuing stock investment and building a portfolio.
2. Start investing heavily
People have a weird mindset about investment. What they think, their money will get doubled in a few months. They become long term investors, when and think as the market will never fall and sell their holdings when the market trends down.
One of the old investors has said, more you experience the market, the more money you make. He talks about, how market changes make us panic and allow us to sell our shares.
You can cover your all losses in the stock market, by just investing heavily. Try to invest all your single penny which you’re saving by
• Avoiding eating out
- buying chip phone
- Healthy habits
- Reducing entertainment
You’ll get a lot of ways to save money. I’m doing it in a safe way. In my experience, healthy habits like eating less sugar and daily workout have helped me to get reduce my medical expenses.
Now, I’m using that money to invest in fundamentally good companies. As a young man, I’ll get more time to stay invested in the market and which in turn helped me to build the best stock portfolio.
3. buy assets, not liabilities
When my friend got his new job, he booked a car within six months. He took a loan from a bank. He impressed everybody in the office with his new car and everyone praised him for such quick progress.
Do you think this is quick progress?
Instead of buying a new car, he could have saved money. He could have invested money in the stocks. Now, he is paying instalments and he is deeply broken inside due to the maintenance expense of the car.
The mistake he made is he invested in the liabilities instead of assets. liabilities breaks down your finances and make you financially poor. When you start investments in assets, they give you passive income, even if when you’re not working anymore.
Try to build assets and buy fewer liabilities. Money is a valuable asset in the world. You can invest money in other businesses or start your own business and make more money from existing investments. Assets make you rich and liabilities makes you poor.
These are 3 ways to grow your wealth exponentially and become financially free at a young age.