If you are a student, let me give you a high five! You’re probably young, idealistic, and so full of potential. How I wish I knew then what I know now, especially the things I learned about life, money, and investing. Since I can’t turn back the clock, I’ll pass on some knowledge to you, the future generation, so that you can perhaps steepen your learning curve and forge a richer future. I’ll focus on money and investing in this article to at least improve your chances at financial freedom.
You may not yet realize it, but time is indeed GOLD! If you are young, you’d probably have more of it since you still have many years ahead of you. Having time is having power, especially when it comes to accumulating wealth. This is because you can use the power of compounding to your advantage. According to Investopedia, compounding in finance refers to the ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings. In other words, compounding refers to generating earnings from previous earnings. It’s like making your money give birth to little baby moneys, which then give birth to other baby moneys. I keep emphasizing the importance of time because compounding becomes more powerful when done for a really long time. For example, $2,000 invested with a 20% annual interest and then compounded for 20 years amounts to $76,675.20. Amazing stuff right? Add another ten more years of compounding to that and it amounts to $474,752.63. Ten years really make a ton of difference! So start investing and saving at an early age and use your years to your advantage.
Invest in Yourself
You cannot afford to become uninformed. In today’s day and age, it’ll be your fault if you do not get educated, formal or otherwise. Go to school, buy books, research on the internet, and attend seminars and courses on personal finance, investing, and real estate. Learn various formulas for investing, for businesses, and other money making endeavours. The fact that you’re reading this deserves another high five. Congrats, that shows you go out of your way to learn! Use that potential and curiosity to your advantage and direct your own life for the better.
Keep your eyes peeled for opportunities. They are present everywhere, we just have to be open and ready for them. In the stock market, companies that are growing sales, earnings, and market share usually indicate a potential super stock. If a certain product is becoming popular, like when you and your friends just have to buy one, or when you see people queuing up at the stores, go check it out. Do your research, check how this hot product will affect the sales and earnings figure. Check the valuations, the company’s stability, and their outlook. Notice emerging trends, high oil prices usually depress people. This shouldn’t necessarily be your case because you can always invest in oil companies that benefit from this rise in price.
Most people don’t bother to account for their assets, liabilities, expenses, and income. Maybe that’s why most people are poor or at best, average. If you want to be wealthy, start managing your finances at an early stage. Remember that what gets measured gets managed. Develop the habit of minding your income and expenses. Make a budget and make sure that you allocate most of your income to investing and saving, not to beer, partying, cars, bags, shoes, or makeup. When you have grown your investing portfolio big enough, there will be more money for the partying and other status symbols.
Learn Self Discipline
According to Robert Kiyosaki, the reason why most people fail at becoming rich is due to lack of self discipline. Most people that earn big paychecks put money in their cars, houses, clubshares, vacations, and other “assets” that really don’t provide returns. They may seem rich on the outside, but if they continue with their lifestyle-centric ways, the inevitable eventually catches up on them. When they stop working, the income stops but the bills that go with the lifestyle keep coming in, until they eventually lose everything. The classic saying of “pay yourself first” is probably one of the most difficult things to do on earth. It simply says that income should be first allocated to saving and investing before using it to pay for expenses and bills. This may seem crazy and extreme, but it is a habit that could rewire your brain for the better. In the worst case scenario, use the pressure from missing payments to become creative at money making. You will definitely come up with ideas because the brain is amazing if you know how to use it. Selfdiscipline is like a muscle, the more you use it, the stronger it gets. You need strong discipline to make a budget, and to stick to that budget. You need discipline to not keep up with the Joneses, and to not give in to “doomsayers” that say this or that investment will never work even though they have no experience with it.
Here are my five investing tips for students. You are lucky to be starting at an early age, so use this to your advantage. Learn to think differently because there is really no wisdom in the “wisdom of the masses”. Good luck and happy investing!