Last Updated on June 12, 2024 by Namooki
I regret a few things, one of which is certain concepts I understood about money. Here is the thing about regret, “once you realize regret is just a thought, then the idea of living without regrets takes on a different meaning”. We are not talking about deep-seated; see a therapist damming regret, are we? No, but I thought the first sentence would make for a great intro. But I want to talk about a form of regret that is positive. The kind that, with careful introspection, you can pass this lesson as a form of generational wealth to your children (watch out for my take on generational wealth in a later blog post).
“Once you realize regret is just a thought, then the idea of living without regrets takes on a different meaning”.
Five years ago, I was fresh out of the University as a Youth Corper. Granted, I was earning a little money, but I could have done something much better. Don’t we all wish we could change some things from our past? The best way to deal with regret is to assess the situation, identify the things you cannot do anything about, embrace that reality, and then move on! For those of you who can do something about it, identify a typical pattern, and then begin to deal with it systematically. With that said, I want to talk specifically about the things I wish I had known about money five years ago that I know now.
The Thing About Money Is…
The first thing I wish I had known about money five years ago is that I need to learn more about money. Yes! Hacking the key to Financial Independence (FAT vs LEAN) takes educating yourself. You need to learn, watch videos, and educate yourself generally about how money works and how to build wealth. It is even better to educate yourself before you start making money because you’ll know exactly what to do with money when you start earning. Have you seen those street interviews where someone is asked what you would do if they received 10 million dollars? 8 times out of 10, it’s usually something frivolous, like ‘I would buy a car’ or ‘I would first go on a vacation… I’ll still have some money left to invest” If you ask them further what kind of investment, they can’t give you a concrete answer. It all boils down to what you feed on. YouTube is a university at this point. Watch lots of videos (granted, some of them would be crap, but you will get the good ones eventually), and listen to a podcast about wealth building. I wish I had done these things five years ago.
The Thing About Savings
So, we all know that savings is essential. It’s no news. What I wish I had known is that savings are not a luxury. Back then, I would save when it was convenient, or I remember the need to do it. And guess what, what I saved a week ago, I am already dipping my hand in that pot, promising myself that I would return the money *shaking my head in poverty*. I never returned the money. Saving money is not a luxury. It’s a discipline you must pass on to your children to build lasting wealth. Additionally, I wish I knew, that savings alone cannot build wealth.
Compounding – A Must
So, compounding is like the gift that keeps on giving (and giving, and giving…). Basically, it’s the idea of making money off your money and then making even more money off of that money. But here’s the catch: you must keep feeding that money machine by reinvesting your earnings.
Here’s a fun example:
- you invest N1,000 and get a 6% return.
- You made N60 in the first year, bringing your total to N1,060.
- Keep reinvesting, and next year, you’ll earn a return on that N1,060.
- If it’s still 6%, you’d make N63.60, bringing you to a grand total of N1,123.60.
- Fast forward 30 years, and your annual earnings are now N325.10. That’s more than five times the N60 you made in the first year! So, sit back, relax, and watch your money grow exponentially. I wish I knew that!
Streams Of Income – The Way To Go
What do you want to become when you grow up? An Engineer. Wrong! An Engineer with multiple sources of income. Correct! Relying on one source of income is not ideal. Hear me out. I am not saying be a jack-of-all trades. What I am driving at is that you cannot build lasting wealth at the optimum speed if you only rely on one source of income. What if you get fired? Or you get incapacitated by one form or the other (like we say in Nigeria, God forbid… but what if it happens?) I wish I had known this five years ago. Name something small you can start, maybe a simple business. Nothing complicated. Don’t try to change the world with your side-hustle. There would be room for that later. It can be a digital business; it could be buying and selling, the main purpose here is increasing your income.
Conclusion
The principle here is long-term thinking. Usually, we underestimate the idea of tiny drops. We are always waiting for that big splash, that significant money drop. You might not get it. In building wealth, you must be comfortable with waiting, hence the term ‘building’. Layer upon layer, brick upon brick. Not brick today and spend it one week later (like me). You’ll never build anything. The key is patience! So get building!
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