"The most powerful force in the universe is compound interest." - Albert Einstein
One of the best things you can do is to save a percentage of your money. If you don't have a savings you will be in constant fear of losing your job, the bills to pay, emergencies, a financial crises and a multitude of other things that come up. You're stress level will increase and instead of focusing on the things that you want you'll constantly be worrying about all the things that you don't want. This takes a tremendous toll on you mentally, emotionally and physically. You'll be worrying that you're just one step away from losing your home, not having enough food to eat, or what you would do if your boss decided to fire you.
However, with a savings, even a modest one, you'll be much more in the success mindset. Unless there is a major problem that wipes out your savings you'll always have money, and even if in the rare case some big and bad financial situation does occur you will still probably have enough money in your savings to cover it all. A savings makes rough times much easier and good times much better. You won't succumb to a poverty mentality as you'll have the piece of mind of knowing that money is always available to you. You won't be in debt and financial stress will disappear. Another thing that's really cool about having a savings is that you can even make money, a passive income, off of it. And the interest you earn from your savings earns interest as well.
Save At Least 20% Of Your Income
Aim to save at least 20% of all your income. The first thing you should do when you receive your pay is to cut 20% (or more, depending on what you can do) right off the top and save it. If you have reduced your expenses sufficiently as described in the previous lesson then this should not be a problem. If it is, then by saving your money first, before paying the bills, you will be forcing yourself to find more ways to spend less. That's a good thing.
With the 20% that you save you can take, for example, half of it and put it in an account that is exclusively for your goal, or passion, and the other half can be put into a savings account that you will not touch for anything except in the case of an extreme emergency. This 10% of your income (or more) should only be used to earn passive income from interest.
Once you put money into your savings account do not touch it! If you are ever tempted to take it out and spend it, even for an emergency, stop and think several times about it before you do. First try to think of ways to get out of your financial situation without touching your savings. If there is no other way then only use what is absolutely necessary. Once your financial crises is over repay what you borrowed from your savings as soon as possible.
Preferably you'll want to put your savings into an account that earns good, compound interest, and is a solid deal - not a gamble. Don't put your savings into an account that is risky as you could end up losing your money rather than earning more from it. Put your savings into a secure savings account. Ask your bank about what options and benefits they have for a long-term savings account. Also be sure to check several different banks and financial institutions to find the plan that is right for you.
Own Real Money: Purchase Gold
The most widely known precious metals are gold, silver, platinum and palladium. Precious metals are of high economic value, used mainly for investments, financial security and freedom. Of all the precious metals gold has consistently proven itself to be the best investment, dating back four-thousand years. Gold provides protection against inflation, economic, political, social, or currency-based crises. It is also notoriously stable with its steady increase in value. Gold is negatively correlated which means it tends to increase in value during hard economic times and worldwide uncertainty. For centuries gold has been recognized as the only true money source around the world. Unlike fabricated currencies, gold cannot be created and therefore is not succumb to government fallacies.
Silver is also valuable, but fluctuates more freely than gold, creating volatility. It is worth much less than gold and occupies more space than a comparable value amount in gold. Gold is a better investment than silver.
There are several ways in which to own gold. The options are through certificates, stock in mining companies, gold and metals futures, digital gold currency, precious metals mutual funds or through tangible coins and bars.
It is best to own physical gold. In this way you won't fall prey to problems with paper currency and you'll increase your financial safety and freedom. Decide on what form of gold you will purchase (jewelry, coins, bars) and where to store it. Purchase from honest sellers. Some banks sell gold too. In any case you will need to authenticate your purchase.
The two best options for storing gold are at safe deposit boxes or in a personal safe in your home. It is common for gold investors to store their gold in bank safe deposit boxes. Insurance is usually not offered for items in bank safe deposit boxes, so it would be best to keep some of your gold in the safe deposit box and some at home. When storing gold in your home you will want to have a superb personal safe. Your safe should be well hidden in your home. A bonded safe company can be consulted about insurance options, as well as your homeowner's insurance agent. Some insurance companies cover gold in their policy. Be sure that a few trusted family members know the location of the safe and have its combination memorized.
There are several Swiss banks that offer gold accounts. Also, Swiss banks are known to be some of the most secure and confidential in the world. Digital gold currency is becoming increasingly popular. With most of these companies you buy gold from them online and they store the physical gold for you. There are usually storage fees and exchange fees involved, however it is easy to do and you'll receive interest payments from your gold investments.
When you own gold you are protecting yourself against economic problems, increasing your freedom and earning some of the best interest anywhere. It is recommended to invest some of your savings in gold to diversify your assets.
The Power Of Compound Interest
Let's say that you put $1,000 into an account that earns 5% compounded interest each month. Every month you add an extra $400. After the first year you'll have $5,962.70. In five years you'll have a savings of $28,485.79. Ten years: $63,759.92. Twenty: 167,126.10. Only $97,000.00 was money that you earned. The other $70,126.10 is free money from the compounded interest.
If your initial balance is $10,000 and you deposit $1,500 a month at 10% compounded interest, in twenty years you will have amassed $1,212,333.99.
Use this Compounding Savings Calculator to see how much money you'll earn with your personal savings plan: /students/calculators/source/compound.htm
See how this works? By saving even a modest amount of money in an account that earns compounded interest your money will make money for you. If you continue with this plan eventually the money that you saved will be making so much interest that you'll never have to work again. You'll be living off the interest alone and you'll still have your savings to boot.
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