The Seeds of Investment – Part II

If you have taken the time and effort to invest in yourself, your reputation, your image, and your relationships, you can start to look toward investment of a financial kind.

What I’ve learnt is that your best investment is first in the preservation of your name and integrity, and this starts from a very young age, whether you are rich or poor, employed or unemployed.

But following this, how do you move into financial investments?

The best financial investments do not start on a grand scale. It is a common misperception that you can only start to invest when you become rich. On the contrary, it is the small, but strict investments you make no matter how little or how much money you have that lead you to becoming rich.

This is the investment in learning how to save money, and learning how to most wisely invest the money you have. The very principle of saving money is, it is money that you will never spend.

For every dollar you have, put aside 40% of that to savings. Open two accounts. One is a true savings account that you never touch, and in this account, you place 20% of what you earn. The other account is your buffer or emergency account, and in this you place the other 20% of the allocated 40% of what you earn. You only touch this buffer account in the event of a true emergency, for example, if you are hospitalised or for a family emergency. The reason for a buffer account is so you never put your hand in ‘the cookie jar’; your savings account.

This is a habit that must be formed from an early stage. Every month, it is much easier to put aside $40 from $100 (40%), than it is to put aside $400 from $1000 (40%). If you can’t start with 40% each month, then start with 20% (10% in each account) and slowly increase the amount.

The funny thing is, however, that many people say they will start to save money once they have a lot of money. It doesn’t happen that way. The more you make, the more you spend. And it becomes easy to live outside your means, which in itself is a very dangerous trap, as it means you have no contingency plan if things don’t turn out the way you plan. If you haven’t developed the habit of saving when you’re young, it will be very difficult to develop it when you’re older.

There is also the principle of compound interest to benefit you. If you start putting away 40% of whatever you earn from a young age, by the time you are 25 you should have hundreds of thousands of dollars just by simple saving and compound interest.

If you’ve been working for the past ten years, this saving money can become your capital for a lot things. But a wise businessman would not use his own money to invest. If you have $100,000 in savings, you can go to your banker and ask for a loan with the money in your savings account as the collateral. With $100,000 in your account and a proven track record of regular saving deposits, the bank would probably give you a loan for $80,000. You can invest this while your money is still in your account earning interest.

Of course, financial investment is a huge area of discussion, and this Gem is not meant to provide you with in depth financial planning advice. This Gem is simply to encourage you to realise and consider the steps behind the process of financial investment.

Please take a moment to ponder… The seeds of investment grow by first planting them in yourself. More seeds must be planted as a percentage of what you earn into a savings account and a buffer account. These seeds – by diligently watering them with good relationships, a strong reputation, further saving and compound interest – grow to become the trees you can climb. From the limbs of these trees, you are now ready to wisely and seriously consider investing in that house, the stock market, a business, or any other investment that will see your ‘trees’ bloom for generations to come.



Joseph Bismark

Group Managing Director, QI Ltd