Growing our piggy bank for now and forever

The more books I read about personal finance and financial freedom, the more I realise the basic concept is similar and the magic formula is there for all of us to learn but few of us apply it consistently, day-in and day-out, with every cent that we can spare in order to achieve financial freedom.

It is to:

LIVE WITHIN YOUR MEANS

SAVE AND INVEST FOR THE LONG TERM

This may sound overly simplistic to you. Just talk to ordinary people around you who are not flashy and have low consumption of large houses and large cars, you may realise that those who have high net worth are those who practice these two simple rules. The way they practice these rules may differ but most subscribe to this fundamental principles of financial freedom.

Why must we live within our means?
Even if your name is Paris Hilton and you are heir to a large inherited fortune, if you do not live within your means even wealth like Paris's would vanish in her lifetime. Take Mike Tyson, former multi-millionaire boxer who is now made bankrupt. Even as he earned millions from his professional boxing career, he spent even more millions on consumption for his lifestyle. Hence, it is not always about the amount of money you make but it is about the amount of money you can save by living within your means.

Living within your means does not have to translate into us living like paupers. There are stories of misers who died alone by themselves in shabby homes but bequeathed more than $1 million dollars to charities. For these people, they may have high net worth but they did not even spend the little bit on themselves to lead a quality life. What you want to seek is a balance. The balance between spending on things for our lifestyle while keeping it within the amount of earned income as well as passive income you generate.

How to save and invest?
When you live within your means, you will find that at the end of each month, your savings account actually grows larger and larger. However, our savings accounts currently pay a very low rate of interest -- at less than one percent per year. In order for us to grow our piggy bank for now and forever, we should use these savings to invest wisely in assets that generate more returns for us to grow our piggy bank.

Deferring your present consumption for the future releases savings for you to invest now for the future. The time value of money allows every dollar that we save and invest now to yield many times its value in the future through the power of compound interest. Hence, every dollar you save and invest is working hard for you to grow your piggy bank. For those of you who are first-time investors, take the time and effort to learn more about personal finance and the various avenues where you can invest.

Different types of investments assets come with different levels of risks and returns. If you are a total newbie to investments. I would strongly suggest you put your money in fixed deposits and treasury bills. These are relatively safe and will grow your money slowly but surely. If you want higher returns, you have to equip yourself with the knowledge by going to the public library and visit many free forums online to ask around for investment principles. Educate yourself and liberate yourself with financial literacy.

May your journey in growing your piggy bank be rewarding and satisfying!

Be well and prosper.