In our environment, we can often see people following one trend after another. They are often afraid of going out of style if they don't. The problem with these, however, is that in many cases they are unsustainable, can be detrimental to our health, or will always keep us financially grounded.
Therefore, in life it often makes sense not to follow every mass movement, but to consider for ourselves whether one or another decision really makes sense in the long run, whether we really absolutely need certain material things in order to be happy, and whether we are not just harming ourselves health-wise and/or financially.
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Here are five tips in handling money that will lead to more wealth in the long run.
1. First save, then buy
Often people buy things before they can afford them. Loans make it possible. However, in the short term we simply give in to our current desires and do not think about the long-term effects. On this way we experience a short-lived feeling of happiness. In the long run, however, the side effects follow: Indebtedness and unhappiness.
Better would be to learn patience and discipline. To buy only things that we have saved before and that we can afford, is the better way. In this way, we acquire products that are really important to us and also learn to value them for longer and not throw them away when the next trend comes along.
2. Look for the right role models
On the Internet and television, we are often presented with people who portray themselves as very successful. Most viewers, however, don't bother to do a little more research into what's really behind it and how these people really finance themselves.
Here's how false role models are created to misguide us when it comes to money management. Money and possessions also seem to be above everything and justify any behavior. In the long term, these ideas are a dead end, and not just financially.
That's why it's important to look for the right role models when it comes to investments and financial investments, who can demonstrate long-term and sustainable success.
3. Start investing early
Smart investing is at least as important as saving. We can't really build big fortunes by saving alone. Only investments that produce returns for us lead to prosperity in the long run.
For example, U.S. stocks in the form of the S&P 500 index have returned an average of about 10% per year from 1965 to 2019. From 100.000 euros thus became approximately 17.2 million. Euro. It's very hard to make up the difference by working alone. So saving and investing go together, and only over time do we benefit from compound interest.
4. Focus on passive exponentially growing income
We can roughly distinguish linear and passive income. Here's how we get paid per hour at work. This income is difficult to increase.
Now when we invest our savings and earn income from them, it is passive income that we no longer have to work for and can keep increasing via further investments of the income earned.
5. Avoid consumer debt
If we always have to buy the latest things and do it on top of that via high-interest consumer loans, we may satisfy our happiness in the short term, but in the long run we get caught in a debt trap and make ourselves miserable.
Better is the opposite way. In the short term, do without, save, invest and in return end up with more and without credit.
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