Last year I became debt free. I paid off all my auto loans. Afterwards the question came to mind – what am I going to do with the savings? The bank doesn’t really provide a good interest on savings. I started to research a bit more about how to manage money. I started reading about financial freedom and what it means. If you didn’t know financial freedom or independence is when your money makes money for you. It sounds funny for sure but I read this in Robert Kiyosaki’s Rich Dad Poor Dad (recommended read). Poor people make money by working. Rich people use their money to make money.
But how do you get to the stage that you get your money to make money for you? Well it is simple but not easy to execute. The most important rule of finance was called the eighth wonder of the world by Einstein himself – compounding. If you have a stable job and a decent incoming wage, the best first investment is to stow it in a 401K account. This is especially a no brainer if your establishment matches a certain percent. That is free money and whoever refuses it is losing out.
A trivial story of compounding from another interesting book – The Black Swan (not the movie) is as follows. The inventor of the chess board asked the king for rice as reward. He asked for one grain for the first square. Two grains for the second; four for the third and so on. The king thought that it was going to be easy to fulfill that request. Until he realized what a mistake he had made. There wasn’t enough rice in the kingdom.
The takeaway point is that small things get big overtime. Compounding can be and should be used to our benefit.
This website is to document my learning overtime and to share it for the benefit of everyone. Hopefully we can all learn to be better at finance together!