Prices in stores rise, falling only in the summer — when seasonal berries, vegetables and fruits appear.
Therefore, we must take into account inflation, which reduces the purchasing power of our salaries and savings.
If we let our money matters take its course, we will soon discover a huge hole in our family budget, growing loan debts and fear of the Future.
To prevent this from happening, it is necessary to rely on several key principles when dealing with money.
Let’s talk about them a little below.
1) Money is “magic”
This is exactly what it seems to those who are not familiar with the basics of financial literacy.
Let me give you a clear example:
Imagine your bank account as an old chest filled to the top with gold coins.
Every month you take a few coins to provide for all your family’s needs.
But the gold is not getting smaller!
Every month the coins appear again — and your chest is again filled to the very top.
How is this possible? — you ask me.
The answer is simple:
When you build your own investment portfolio, you will get the same non-decreasing “magic effect”.
You will spend the income received, but not the “body” of your financial capital itself (which will remain untouched and will continue to bring you a stable income).
2) How to make money “serve” you
A technical question arises: how to start forming this very “magic chest”, also known as an investment portfolio?
The first step is to accumulate a “reserve fund” — also known as a “nest egg” or “financial cushion”.
This is a reserve of money in case of sudden job loss, urgent expenses and other everyday problems.
Step two: Start buying index funds that consist of stocks of the largest companies in the country.
This is the only tool that can beat the inflation rate and multiply the money you invest many times over.
Third: Don’t forget about purchasing foreign currencies and assets denominated in those currencies.
What will protect your capital from devaluation of your national currency.
Fourth: After your “chest” is full, transfer part of your investment portfolio to conservative assets (rental real estate, government bonds, bank deposits, etc.).
They are the ones who will bring you monthly income.