Make your money grow but choose the best way to do it. Most leading personal finance experts prefer to advocate the route of improving their earning power instead of saving money, so which do you think is the best way to grow your wealth?
One can argue that it is better to have a combination of both good earning power and setting money aside for a nest egg. If you are looking to explore ways to how best to grow your wealth, then looking into the fundamentals is a good way to start.
The conventional way of growing one’s wealth is traditionally to put aside cash and save it, creating a personal savings plan that can double as emergency funds or just a nest egg. There are many ways one can save; you can stash your cash under a bed or place it in a savings account but would this method actually grow your wealth? And above all, let’s not forget that inflation eats away at your savings when it’s lying dormant. Every minute you leave it untouched, the more value it losses.
The older generation has always preached about the virtues of saving but at this current economic climate saving money from what little surplus you have might not be the best way to grow your wealth. This does not mean that one should not attempt to save money, but saving small amounts of cash will not grant you the growth of wealth you seek to improve your financial status.
If your financial situation does not allow for any extra money to be had after bills and living expenses, there’s no way you can attempt to start saving until your monthly income increases in order for you to cope with your expenditure. Finding yourself living from paycheck to paycheck can be very stressful and by having no means to keep aside money for emergencies or savings, the pursuit towards growing your riches would be placed on the back burner.
The world moves fast today, and almost everything we want to achieve in life is also expected to be done at an accelerated pace. The mindset of focusing your energy and time into improving your earning power instead of saving money may well be a more popular approach these days due to how fast an increased income can change your life. Financial literacy is key when you plan to improve your finances by earning better with a flow of increased income. It can be very easy to get further into debt and expenses.
Possessing a keen sense of financial literacy with frugality can greatly help your financial state and grow your wealth when you start to earn more. Focusing your efforts on improving your earning power will help you manage your daily and monthly expenses better as now you won’t feel as constricted and the extra cash you have leftover can be easily placed into investments or savings. Earning more will also help you get out of debt faster. And the faster you pay off your obligations, the more surplus cash you would have, and this in turn can be invested to grow your wealth by leveraging the magic of compounding interest.
Two roads diverged in a wood, and I —
I took the one less traveled by,
And that has made all the difference.
– Robert Frost
Attempting to save money with no improvements towards your earning power is not worth the time and effort unless you are financially secure; having no issues with your bills and living expenses. If you are in financial difficulty with no dispensable income then you should not put your effort into saving money; instead work on improving your income.
Personal Finance Expert, Suze Orman has said, “the way to build your savings is by spending less each month”, but if you are already spending as little as possible to keep yourself financially afloat, then your wealth will not grow any larger with just saving money. In order to save money wisely, you need to ensure your life is well-managed with no compromise towards any important expenses; and that is – you should not be prioritizing on saving cash when there are arrears of owing.
Traditionally, chances are if you grew up in a middle-class family, “saving money” from your monthly pay check is an age old adage passed down from your grandmother to your mother and right down to you. It’s almost unheard of to not have your elders remind you to scrimp and save for a rainy day.
In contrast, growing your wealth by earning more is a path that hasn’t been explored by many. It is often thought to be a luxury meant for the rich and wealthy. It is not true that only the top 20 percentile (or the T-20 group) has the privilege to be investors. Sure, the lower income group do not have the means to invest when they’re barely scrapping by or if they’re wondering they have enough for their next meal. The middle income group has the fear of losing whatever they have left as there is a risk element involved in investing. They would often opt for the safer route of “preserving” whatever they have instead of risk losing any of it. Hence, this is why sound financial literacy is an absolute need.
And with that being said – it is in your best financial interest to always exercise a conscious mind with financial decisions as it is very easy to go astray when your income has increased. Once you have the affordability and the luxury of having surpluses of cash, growing your wealth is more manageable. Then, savings and investment options are not something you have to scrimp for and you can make better financial decisions when you are not financially constrained.
It is best to review your finances and determine first which method would work best to grow your wealth based on your circumstances. If you are in a state of debt, then focus first on settling your fixed expenses and then grow your earnings. This is possible, but it takes perseverance and discipline. On the other hand, if you are financially stable and have the means of saving sufficiently each month even after deducting all your expenses, then increasing your earning power through a diversified investment portfolio is a strategic move to grow your long-term wealth.
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