Hello everyone!
Usually I don't write posts about finance as I always think I don't know know enough about it. Today, I was thinking about what should I write when I want to share some knowledge I have. My answer was: compound interest. It's probably the main principle I utilize to build wealth. This blogpost is definitely not financial advice, just my opinion how I tackle my finances.
What is compounded interest? Well, it's interest on interest on interest, etc. When an investment has a return of 5%, that's great. After 1 year, your €100 will be worth €105. After 2 years, it won't be €110, no it will be worth €110,40. That's because besides earning interest on your first €100, you rdceive interest on the received interest as well. With this example, it doesn't look like a lot. But if you wojld extrapolate the example over a duration of 10, 20 or even 30 years, you'll see that it's definitely worth it.
That's the reason that I try to invest on a regular base, ofcourse with just money I could miss. Because time will help me to keep growing my wealth. Important hereby is that I rather have a decent, stable percentage than aiming for crazy returns with associated high risks. Yes, I prefer to invest in etf's trackkng indices rather than going for the next 100x. As I believe that the world economy will keep growing, generally speaking, thus my wealth which I invest in the world economy should grow as well. Ofcourse, I am speaking in the long run, like in the coming 20 to 30 years.
Only the future will tell if that approach is good or not but personally I believe it will work out. Another important aspect is that you need to add money consistently. Especially in the beginning, the more you could add, the faster the snowball could grow. That's the reason when I receive my wage, I keep a part to live, a part go fund my emergency fund and a part to invest. I try to not skip a month, although it's not always that easy. Life is expensive and there are always sudden costs appearing.
I am definitely not a minimalist, living to save/invest as much as I can. I try to find a good balance between living here and now but building wealth simultaneously as well. So far it's working out. I would say that I am really living the life while trying to build up soe wealth as well. So far, it's not that much but I would rather say I am laying the foundations for later.
As I am always eager to learn about others their financial journey, I wonder how you treat your finances. Not that much interested in which funds/crypto you invest, but merely which strategy you utilize for the longterm? Are you struggling to survive every day or are you able to invest? Making offers to go fire as early as possible or just want the financial independence?
Thanks for stopping by and taking the time to give your vision!
