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“There is a limit to what you can save, but there is no limit to earning more money.”
That is one of the premises used by Ramit Sethi, American adviser and businessman, author of the bestseller “I’ll teach you how to make you rich” and other books on personal finance.
Many people put their money in savings accounts in the bank (which usually pay low interest rates), thinking that it is a good way to financially support their future.
However, Sethi says that this is not the best way to raise money. Worse still, if you leave resources in your current account that you are not using.
Finally, “you lose money every day due to inflation,” says the expert.
And unfortunately, “nobody tells you that money loses value invisibly”.
In fact, saving money is not enough, he adds, because to increase your capital in the long term, you must use other tactics that are more effective, according to your own experience.
Sethi was a student of technology and psychology at Stanford University, when he decided to create the website “I will teach you how to make you rich”, which would later give rise to the book of the same name.
As he came from a middle class family, he had to manage to find a way to finance his studies. It was then that he applied for more than 60 scholarships and finally managed to enter Stanford.
“When I received the first check, I invested it in the stock market and immediately lost half, ” he confesses.
Then he set himself the task of learning how money actually works. And after reading several consultants who advised things like making a budget or “not having a coffee”, he came to the conclusion that those tips did not make much sense.
“If you concentrate on saving the US $ 3 of a coffee, you have to stop taking 3,000 cups to save US $ 3,000, and who knows how long you can delay,” he says.
How to earn money then?
Concentrating on things like renegotiating your salary; reduce your bills or the value of the rent ; taking advantage of the advantages that exist in some countries for savings destined for retirement; creating an additional income to your salary and investing in the stock market, he explains.
Although it is not simple to get a salary increase, Sethi argues that even a small increase will make a difference after a few years.
And in the case of creating an income parallel to the resources you get with your full-time job, the consultant says that if that vein thrives, it may even become your main source of income.
“Everyone has some special ability to start a complementary business.”
“Think, for example, what you like to do on a Saturday morning, maybe you love fashion, maybe your friends will ask you for advice on dressing all the time,” he says, imagining a scenario.
“Now ask three of them if they would pay you $ 20 to help them improve the way they dress, if they say yes, then you have a potential complementary business.”
Invest in the stock market when you do not know how to do it
In the case of investments in securities markets, what can a person do that does not have any knowledge and not much money to make good decisions?
“To protect yourself and avoid losing money, you must have a diversified investment portfolio and be more conservative, if you need to,” he says.
How is it done?
“You have to focus on putting the money in diversified and low-cost stock indexes with a long-term perspective, which can be decades.”
“Smart investors value consistency and a diversified portfolio more than anything else, rather than the actions that are fashionable.”
The key, says Sethi, is to think about getting returns in the long term , given that “the stock market is a fantastic way to create wealth.”
There is also the option to invest in the property market, but the author warns that this path is not always the best investment, because not all properties increase their value over time.
Although many disagree, Sethi says that the issue of stock investments does not have to be complicated.
“I go into my investment account about once a month and spend less than an hour,” he says. “It works automatically.”
And one of the stock indexes recommended by the expert is the S & P 500 , among other alternatives.