Part 2/6 — Managing Money — The Mind Stone

Make sure you control how you spend your money; otherwise, it will quickly end up controlling you.

Money management is all about controlling your mind.

When I started my journey of writing an article every day, I gave you a brief glimpse of my personal finances and my mindset on money. I shared how I have always been super conscious of the way I spend my money. Check out that article here.

Today, I wanted to talk about the basic framework I have adopted over the last couple of years (ever since I became financially independent) to save and grow money. And since this is not rocket science, you can follow these tips to manage your money too.

Starting Early

Albert Einstein once said, “Compounding is the eighth wonder of the world,” and he was right. Billionaires like Warren Buffet, who arguably made money with money instead of producing some product, leverage the incredible power of compounding to be the uber-wealthy.

Here’s a snapshot of what your investment will look like if you manage to put 500$ away every month for the next 30 years, earning a 12% interest compounded annually (which is entirely doable in today’s markets).

In this situation, time is your friend.

You see, if you start at 25 and invest till you’re 55 (for 30 years)

Total Amount Invested: 180k $

Amount Delivered: 1.76m $

Growth factor: 9.71 (Your total investment grew 9.71x)

On the other hand, if you start at 30, and invest till you’re 55 (for 25 years)

Total Amount Invested: 150k $

Amount Delivered 950k $

Growth factor: 6.33 (Your Investment grew 6.33x)

Just a period of 5 years can make such a huge difference! (1.7m — 0.95m = 750k)

So, start as early as possible and let your money work for you while you relax.

Personal Action: I started putting a small amount aside every one since I was 21, now I am 25, and super glad that I did so.

Ask for Guidance

One of the critical drawbacks of our education system is that it does not teach us a lot about money. Most curriculums don’t even cover the basics. Therefore, not all of us are financially knowledgeable. Not to worry though. Some professionals can help you manage your money and guide you too. They can bear the torch to show you the best strategies for investing wisely.

If you can, find professionals who can help you do so. I assure you. Money spent on their services will be worth it.

Personal Action: I relied on a family friend for my investment portfolio. He guided me not only in the early stages of the investment but throughout the whole journey. He helped me keep a sane head when I panicked about the decline of my investment portfolio during the 2020 COVID pandemic hit.

Verify Your Knowledge

It is also essential to verify and test your knowledge. I would strictly advise you against trusting someone blindly with your money. Instead, you should keep an active tab on your investment and question whatever you don’t understand. An excellent guide will always be at your disposal to answer your questions right away.

Moreover, you should invest some time learning about money management and keep track of your expenditures. I’ve always believed that investing and growing money takes more understanding than earning it. So, do it wisely.

Personal Action: I used Zerodha Varsity to learn a great deal about the stock market and popular investment techniques.

Follow these tips, and you can rest assured that your money will be there to offer you all the luxuries/amenities and a safety net in case you ever need one!

Onwards and Upwards!