Making money is for spending, and saving money is for future spending. How to save this money? It is the process of financial management. Money is not omnipotent, nor is it the root of all evil; it only generates value when it is well utilized. Becoming wealthy through financial management largely depends on good habits. Let's look at those habits in financial management that you might have overlooked. The sooner you learn, the sooner you can possess more wealth.

6 Ways to Teach You Investment and Financial Management

1. Saving money in a low-interest-rate era is equivalent to losing money

In a low-interest-rate era, saving too much money is equivalent to wasting the time value of money. The deposit interest rate is too low to be suitable as a long-term investment tool, and moreover, bank deposits do not have the benefit of compound interest. The decrease in purchasing power and the decline in real return rate caused by inflation mean that excessive saving is a waste of resources. Of course, you can keep some liquid money in the bank for easy access. From an economic perspective, the earlier money is used, the more valuable it is, and the higher its economic utility. You save money in the bank with the intention of enjoying a better future through savings. However, in the context of inflation, postponing enjoyment actually reduces the enjoyment.

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2. Money only has value when it is utilized

People who over-save are typically conservative and risk-averse. In fact, not taking risks is a risk in itself. Let's look at the example of the Nobel Prize—6 ways of investment and financial management that can turn your 400,000 into 2 million.

In 1896, Nobel donated 9.8 million dollars as the original fund for the Nobel Foundation, but the annual awards had to pay at least 5 million dollars in prizes. To avoid risk, the foundation was only allowed to deposit in banks and buy government bonds after its establishment. As a result, by 1953, the foundation was left with only a little over 3 million dollars, not enough to pay for a single prize. It was in this year that the foundation changed its financial management method, which was originally only allowed to deposit in banks and buy government bonds, to one that mainly invests in stocks and real estate. By 1993, the total assets of the foundation had grown to over 200 million dollars.

3. The ability to use wealth is the main reason for the widening gap

A quote from the book "Rich People Think Differently Than You" goes like this: "If you want to be rich, watch what rich people do and then do the same." Survey results show that 80% of millionaires are the first generation of the wealthy. What does this mean? It means that they do not have so much money through inheritance or family businesses. 80% of them earned it on their own, and most of them because they have their own businesses. They are frugal, understand the principle of spending less than they earn (income greater than expenses), are good at managing money, and know the importance of saving and investing. Although their income is not the highest, over time, the accumulated net assets are something most people can never achieve in a lifetime. These people know how to attack (make money) and, more importantly, how to defend (preserve money).4. Don't wait until you have wealth to start managing it

For investments that are unpredictable in the short term but offer high returns in the long term, the safest strategy is to invest first and then wait for opportunities, rather than waiting for opportunities before investing. Procrastination is the main cause of failure in financial management. Many people have a go-with-the-flow attitude towards managing their finances, but as they grow older and see others' wealth growing rapidly, they finally realize the importance of financial management. At this point, you have already lost the magic of compound interest. Financial management must start when you are young. One of the keys to becoming wealthy at a young age is to invest early, so that there is enough time for compound interest to take effect.

It is evident that the difference between a one-time investment and continuous investment is significant: saving 10,000 at once for 40 years versus saving 10,000 annually for 40 years results in a difference far greater than 40 - 1 = 390,000, but rather 1.92 million! Saving 10,000 annually for forty years amounts to 1.996 million! In essence, it comes down to three elements: regular savings, stable returns, and patient waiting. Under the effect of compound interest, the actual difference in input and output is much greater than you might imagine. Long-term investment behavior generates a much better compound interest effect than a one-time investment. Don't wait until you have made a fortune to start managing your finances; the lesson from compound interest for our lives is to set clear goals, start early, and be persistent.

5. All investments carry risks, but there is no need to fear them

The first thing to emphasize is not to take unnecessary risks. Futures, foreign exchange margin trading, bond margin trading, and lotteries are all extremely risky behaviors. By making these choices, we risk losing all our capital. To gain something in financial management and investment, do not avoid risks blindly. The world will change more rapidly in the future, and changes will inevitably accelerate at all levels, including business, economy, finance, politics, and society. The redistribution of wealth in the future will inevitably speed up.

In the past, you could live a stable life without taking risks, but facing the changing investment environment of the future, not taking risks has become the biggest risk. For example, those who were considered wealthy in the 1980s by having 10,000 yuan and kept their money in the bank, or those who had money but never invested in real estate or participated in the stock market, the changes over the past decade have fully demonstrated that not taking risks is actually the biggest risk.

6. Be good at leveraging, and make money with other people's money

Should you invest if you don't have money? It depends on whether you can seize the investment opportunities. If used properly, borrowing to invest can accelerate our wealth accumulation. Don't be afraid of borrowing to invest, but be very cautious. Suppose you buy a house with 1 million in cash now, and a year later, you are fortunate to sell it for 1.3 million, making a 30% profit. If you only paid a down payment of 300,000 for this house, and the remaining 700,000 was borrowed from the bank at an interest rate of 10%, and you sell it for 1.3 million a year later, your profit margin increases to 77%.

Conversely, if the house's price不幸下跌了30% after a year and is sold for 700,000, those who bought it with cash would lose 30%; if you only paid 300,000 in cash for the house, and the remaining 700,000 was purchased with a bank loan at a 10% interest rate, then the loss would be 123%. When the investment return rate is higher than the borrowing interest rate, borrowing to invest will increase the investment return rate; when the investment return rate is lower than the borrowing interest rate, borrowing to invest will actually decrease the investment return rate. The effect of financial leverage is like a seesaw; it can lift people very high or drop them very hard.

7. Principles of borrowing to invest

(The original text ends here, and the translation is incomplete. The last sentence should be translated to complete the answer.)1. Income should have a certain degree of stability, at least enough to pay the interest on time, or in other words, to make the monthly mortgage payments;

2. Personal assets should have a certain accumulation, and the expected rate of return on investment should be relatively reliable.

We also need professional advice from experts. As the ancients said, "The gentleman is not different by nature, but he is good at making use of things." To live a good life and succeed, one must learn to leverage others' strengths, be adept at using other people's time to make money for you, learn to delegate financial management, and learn to use other people's wisdom to make money for us. This is also "each profession has its own expertise." The primary foundation for wealth accumulation is to keep the money earned, then rely on good budgeting and planning, and make appropriate management and investments. In this way, your path to financial prosperity will become smoother and smoother.