Fundamental Financial Principles Many People Miss

In the world of finance, there are principles that are proven to be effective because they’ve been tried by a number of people with substantial results. They are not laws or rules per se but proven ways to build ‘financial integrity’.

Integrity can be understood as how well a person carries out his or her financial goals without be led off track or derailed. Its very easy to get derailed if one doesn’t have a process or system to keep them on track.

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Saving Is Not Investing

Saving is good. It will be needed on a rainy day or when emergencies happen. However, savings can’t quite cut it in the sense that it can become a trap in the wheel. Anytime an emergency comes you used up your savings, after the emergency you fill up your savings only for it to be emptied again when another emergency happens.

I always like to see saving as a first step in the investment journey. Once you have enough saved up the next step is investing it on investments. Many people stop at the savings part. The reason why can vary from individual to individual. Sometimes it could be that there is never enough savings.

The thing is that investing has to be prioritized because no one gets wealthy from saving. Yes, saving early helps but the only way for that to be able to make a difference is when you have at least a decent APR on your savings and also save in larger sums.

One should focus on investing early on in their financial journey.

It Pays To Be Educated

It is very important to be educated. Many people (myself included) make unnecessary financial mistakes simply because of the lack of financial knowledge. In the financial world, ignorance is not bliss. More like a whip that constantly gets lashed at you.

When one has a low financial IQ, his or her financial literacy is below the 50 level. This can be a huge liability on one’s financial journey. Luckily for us, we live in a digital age, there are lot of good information out there. It is great to expose oneself to more financial knowledge, understanding the different viewpoints, ways and methods to financial freedom.

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Buy Assets Not Liabilities

Its easy to sink into a financial chasm when one doesn’t understand liabilities. It might sound outrageous but the old system is built in such a way that the less knowledge one has the better it is for the entire system.

Athletes and entertainers are one of the classical examples of what buying liabilities get you into. They are off the top of the 'wealth ladder' as soon as they climb it. Most artists are in some financial trouble once they get a taste of success.

However, things are changing over the years. Now they buy and invest in businesses and real estate properties. That’s the right way to building wealth, buying assets that increase in value over time. Liabilities just run you dry retarding your growth.

It Is A Marathon Not A Sprint

Realize. That. It will. Take time. We live in a fast world so we somehow believe that everything should happen fast. Yet the process just can’t be skipped. It is the essence of things.

That's why-up until recently-many wealthy people were at least 50 years old or more. It is a long journey, sprinting will make you burnout fast.

The good news is that since it is a fast world, it wouldn’t take more than 20 years to be wealthy like former generations, maybe 10 years or less.

Thanks For Reading!

Profile: Young Kedar

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