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Monday, July 4, 2011

Grow Your Money

Grow Your Money

When I was a kid I had this fascination of growing plants. Only later did I realize that growing your plants is a lot like growing your own money.

One day during my childhood days as I was playing in our backyard, I noticed a seed of a corn by the side.  While looking at the corn seed, I saw another small corn plant beside it.  I realized that from that one seed a fully grown corn plant can bear fruit and produce hundreds more.

If you plant those hundreds of new seeds, you multiply the harvest so that each of those seeds would yield another hundred each.  Then an idea popped in my head.  I could actually get all the corn I need just by starting to plant this one tiny seed I'm holding on my hand.

Growing you money requires the same inspiration.  You begin by the small money you have in your hands.  You decide to "invest" it by using it to create something of value to other people.

You sell it to them and they give you more money in return.  You use that money to "invest" more so you can create more of those.  And so goes the cycle and you live happily ever after.  I wish it was that easy.

Just like growing your plant, you have to take care of it.  You have to cultivate it so that it sprouts and becomes healthy.  You have to let sunlight and water nurture it everyday.

You have to treat your money the same way you grow your plants.  You start with only a small amount from your savings each month.  Then as it grows, you protect it from unnecessary spending. Everyday, you continue to save your money until it grows.

Sometimes, we don't realize that growing your money takes quite a bit of time. You need time to have your money work for you through your investments. Otherwise, what you might call as investments are actually gambles you are hoping would turn into a jackpot the next day.

How do you grow your money?

The short answer? Try anything and continue to learn.
Due to my wife's frustration with her time deposit, we insisted on investing in bonds.  Now, we're getting 10X what we  would have gotten from the time deposit.  Granted, we won't be able to touch our investment for a few more years.  We're not in a hurry.

I also tried investing the Philippine Stock Market, with money I know I can live with if I lost it.  Suffice it to say, some of those stocks are up 55%, while others are only 15%.  Thankfully, the Philippine Stock Market looks pretty good right now, my portfolio is up at an average of 22%.

My wife and I also dabbled into private lending for a real-estate investment. We got lucky in that we did business with a very trustworthy investment partner.  In just 4 months, we already earned 4% of the money on top of the capital.  And we didn't have to do anything for it.  It's all passive income.

Make no mistake.  I don't claim to be good at investing.  Like you, I'm still just learning.  Suffice it to say, I've gotten very lucky so far.

So how exactly can you grow your money?

1) Try something.  Try anything.  But only with money you can lose.  When you lose, as they say, charge it to "experience".  Consider it as your tuition fee in your continuing financial education.

2) Take action. Learn everything you can, but know when to stop analyzing and get in the act of doing.  Only when you act will you get the feedback you need to know if what
you're doing is working or not.

3) Be patient.  Life is not a soap opera.  Your money may not earn anything substantial for quite some time.  If you need money RIGHT NOW, don't invest. Earn more! Be warned though.  Once people know you have money to invest, all kinds of people will want to get a piece of it.  Some with not so good intentions.

One time, I was asked by a new friend for a short term loan (1 week) and promised a 3% interest on the loan so she can fulfill the demand on her business. Reluctantly, I discussed the deal with my wife and we ended up lending her the money thinking it's relatively safe since it's only for a week.  At the same time, since we got to know her through friends we were comfortable with, we thought it would at least lessen the risk.  Luckily, we did get out money back and the interest.  But not without its moments of doubts. 

Later on, I realized that some of our friends also invested in her business and unfortunately they didn't get their money back.  Worse, they even asked some of their friends to invest too.  Now both their money and their business partner is nowhere in sight.  The same thing could have happened to us. We were very lucky indeed.

3 things I learned from the experience

1) Don't lose money.
That's the first rule of investing.  Don't lose money.  Don't get into something you don't understand.  Even if it promises a lot of things.  If it's too good to be true, then it probably is.

2) Invest only with money you can lose
Don't bet your house on it.  If you're in doubt, save your money.  If you lose the money, swallow your pride and just think of it as your tuition fee in your financial education. Don't let losing money prevent you from learning the lesson.

3) Listen to your intuition.
One thing I realized is that I did see red flags early on.  But I chose to ignore them.  I tried to search for a profile of her business through the internet and found none. I also didn't find her facebook profile. I asked my fried why her business didn't have a website and she just responded that it's because she mainly deals with corporate clients, some of whom are her previous employers.  Maybe she was telling the truth.  Maybe it was nothing.  But I sure did have my doubts.

As you can see, growing your money is a constant learning process.  If it's easy then a lot of people would have already been rich.  One thing that never fails, is knowing what you want,   your willingness to learn and make mistakes.  And the courage to face the day without worry or fear.  In the end, money is only a means to take you to your dreams.  And your money can only grow up to where you can be.

Rich Money Habits

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