“A penny saved
yesterday, a penny saved today becomes two pennies tomorrow”… Anonymous
yesterday, a penny saved today becomes two pennies tomorrow”… Anonymous
We all have heard the quote
above at a certain time in our lives; I heard it like gazillion times while growing
up. A quote that says a lot about saving. There are other phrases that have the
word saving as a content; for example, “Saving for the raining day”; “Saving
for the future” etc. We all know these
phrases and try to embed their meaning in our daily lives; but what exactly
does this saving mean.
above at a certain time in our lives; I heard it like gazillion times while growing
up. A quote that says a lot about saving. There are other phrases that have the
word saving as a content; for example, “Saving for the raining day”; “Saving
for the future” etc. We all know these
phrases and try to embed their meaning in our daily lives; but what exactly
does this saving mean.
Saving is the act of setting aside amounts of money from your income for future
purposes; the future could be tomorrow, next week, next month, next year, even
a decade from today, all depending on the saving goal.Let’s plug in figures to
the definition; a given amount of our monthly income is saved every month; say N20,000
and over a year it adds up to N240,000. Easy isn’t it? We can call this the Addition
Effect.
But what if we just don’t set money aside, we let this money work for us; i.e.
the money we set aside generates more money for us. Interesting yeah! Sure we
have also heard this quote; ‘Making money multiply”, we can call this 3 Ms of
investing. This quote forms the basis of investing.
A while back I heard this podcast from one of our very own life strategist were
he said, “A wealthy man uses his income to buy assets that pay for his
liabilities while a poor man uses his income to pay for liabilities”.
Funny quote isn’t it but what keeps ringing in my head from the quote is “………uses
his income to buy assets” as this totally relates to investing.
So what is investing? It is
the act of setting aside amounts of money from our income to buy assets that
would produce more income for future purposes. Comparing this definition with
the savings definition, setting aside amounts of money sticks out but what we
do with that money is what defers. Let’s plug in figures using the scenario from
above, we set asideN20,000 from your income in a month to invest in an
asset that produces sayN1,000 every month, so using the additions rule,
you haveN32,000 over a year i.e. your initial N20,000 plus the N1,000
earned monthly over the year. Now imagine this is done every month, thenN20,000
each month spun over various months into future years, unimaginable yeah? Now
that is what I will call Multiplication Effect and what people call,“making
your money work for you.
the act of setting aside amounts of money from our income to buy assets that
would produce more income for future purposes. Comparing this definition with
the savings definition, setting aside amounts of money sticks out but what we
do with that money is what defers. Let’s plug in figures using the scenario from
above, we set aside
asset that produces say
you have
earned monthly over the year. Now imagine this is done every month, then
each month spun over various months into future years, unimaginable yeah? Now
that is what I will call Multiplication Effect and what people call,“making
your money work for you.
Which would you prefer; a
life embedded in a saving culture or an investing culture? We should all be preparing
to move to the new culture of building baskets of wealth from little fruits of
money. I learnt about it pretty late or rather I thought investing was all
about having a huge amount of money piled up somewhere before making good use
of it. I thought wrongly because one of the wealthiest men in the world; Warren
Buffet, started small and grew his wealth over the years to what it is today.
It is all about adhering to that culture; the investing culture. Thinking
like the life strategist, you never know, someday we all would be wealthy
people.
life embedded in a saving culture or an investing culture? We should all be preparing
to move to the new culture of building baskets of wealth from little fruits of
money. I learnt about it pretty late or rather I thought investing was all
about having a huge amount of money piled up somewhere before making good use
of it. I thought wrongly because one of the wealthiest men in the world; Warren
Buffet, started small and grew his wealth over the years to what it is today.
It is all about adhering to that culture; the investing culture. Thinking
like the life strategist, you never know, someday we all would be wealthy
people.
By: Ahmed Olaitan Banu