Money is one of the most important and talked about topics in our lives.
We probably spend at least a third of our daily adult lives trying to make money. There's tons of media and screen time devoted to money. This whole website is about money.
Most activities we do require money directly or indirectly. Driving a car, going on other forms of transport, purchasing food, staying warm or cool in the home and so on. AGL Energy Ltd (ASX: AGL), Woolworths Group Ltd (ASX: WOW) and so on aren't going to give away their products or service for free.
We are only going to earn so much money during our lives, our earnings income from our work is relatively fixed year to year.
But the one thing we can do to help is save our money and invest it into income-producing assets that will improve our income over time.
One of the main things that many wise, well-off people say is that they wish they could have started investing sooner and they wish they would have invested more. Compounding is an extremely powerful tool that we can use to grow our wealth. If we end our working life with $1 million, that's great. But if you could have had just one extra year of saving, that $1 million could have been $1.1 million with another 10% growth in 12 months.
Compounding is what turns investing $1,000 a month into $1 million after a number of years. The more you can save and invest the better off you'll be financially over your life. Investments pay us money to own them.
But the problem is that you can being too miserly with your money. You're not really living much of a life if your only goal is to accumulate as much money as possible. Don't forget, the idea of money is for it to be used as an exchange for something else. It's not a good idea to save all your holiday trips until you're 90. There's a lot of value to doing things sooner rather than later.
But obviously you don't want to go spending all of your money either, or else there's nothing left to invest for the future.
You need to find a balance where you're spending money to enjoy life now, and not have regrets, whilst also investing to achieve your future money goals.
