Finance: Fill & Download for Free

Let’s say you start investing when you’re 20. You manage to save $5,000 each year and put them into stocks and index funds, which net you 8% in returns per year on average. At 30, you stop putting in money for good, but keep the investments you’ve accumulated so far.Now, a different scenario. You don’t want to save and invest $5,000 each year in your twenties, because hey, you’re young. You want to have fun, you can do the responsible stuff later. So, you start investing at 30, the same sum each year. However, because you started later, you don’t stop after 10 years. Instead, you put in $5,000 every year until you retire at 65.Here’s the insane part:The kid who invested from 20 to 30, then never again, ends up with more money.$1,156,619, to be exact. The late bloomer, despite his continued efforts, only makes it to $930,510. That’s one nice home for $226,000 less. Or a Ferrari. Or an important surgery. Or five years of living cost in retirement, who knows.The most important thing to know about personal finance is this:If you don’t start playing this game today, you’ve already decided that you will lose it tomorrow.“Compound interest is the eighth wonder of the world.” - Anonymous

Imagine you’re in the middle of the desert.Imagine that when you work, you get paid in water.The first problem you will bump into will be how to store your water.Solution?Use a glass instead of your hands.Second problem?The water will evaporate with time, correct?To solve this you need a canteen with a cap to prevent evaporation.Great!The next challenge will be to resolve long term reserves.This seems like a simple solution; you get multiple canteens and build up your store.Amazing!Next problem…When you lose your strength to work, you will need to start consuming those canteens. Your life expectancy in the desert will be determined by the number of canteens you were able to accumulate during your work life.Some people in the desert may have accumulated enough to drink during their elder years, some won’t.Ideal solution?Own a water well in the desert.(Source of all images: Google)Interpretation of the analogy:Water = Money (cash)Water in a glass that evaporates = Cash in a bank.Water in a canteen = Assets that appreciate with inflation. They maintain their value over time. Some examples are commodities like oil, gold and silver.Accumulated water in canteens = Savings in assets.Losing strength to work = Retirement.Water well = Cash flowing assets.Lesson of the analogy:Money is only a mechanism of exchange that holds a temporary storage of value.If you save cash, time will ‘evaporate’ its current value.Some assets protect us from monetary volatility. This is specially important in third world countries like my Mexico.Accumulating assets may not be enough to guarantee your retirement because you will need to liquidate them to pay for your needs.The water well represents cash flowing assets. These assets produce passive income, meaning they produce cash even while you sleep.To answer your question, how can you improve your personal finances?One of the best ways to improve your personal finances is by investing intentionally in cash-flowing assets.The most common are real estate rentals, businesses and royalties.Your first step is to protect your savings from the external influence of monetary policies that will “evaporate” the value of your hard work.Be in control of your finances and #NeverGiveUp!

Because he can conduct raids on his own party leaders, you never know with Subramaniam Swami. But the man is one of a kind. Salute!!