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RE: Why Investing Is Good

in #steemit7 years ago

There are four types of people: Spenders, Earners, Savers and Investors. A person who is a Spender will spend more than they have. Children are a good example of a Spender. They really do not have a way to make money so get it from their parents in the form of allowances or gifts. They spend their money without the guarantee that they will be able to replace it. Unfortunately this is bad for children because it doesn't force them to choose between immediate gratification (buy some candy) versus longer term desires (buying a cell phone or tablet). There are some exceptions to this rule - a couple children whom I have known learned to defer their wants to achieve greater goals.
The second type of person is an earner. This person is like a child with a paper route or a lemonade stand. They establish a stream of income based on their labour but tend to spend their money as it comes in. Most of the working poor fall into this category. They work but never get ahead. They are able to remain afloat as long as they have a job. Many of the working poor buy stupid things. I knew of one girl who immediately got a tattoo, dyed her hair purple and had dread-knot extensions put into her hair when she went to nursing college. Of course reality reared its ugly head when she went to work in a hospital. Many of the purchase of the working poor reflect the purchasing patterns that they learned as children - immediate gratification versus long term goals.
The third type of person can be found in a few of the working poor and the lower end of the middle class. Savers put their excess money into long term low growth potential instruments. When I was young, I saved my money and bought a Guaranteed Investment Certificate (GIC). The first one that I bought cost $100 and paid a low annual interest. One hundred dollars does not seem to be very much but for a child hording pennies from earning money by returning pop bottles (all containers should have a refund available just to give children a source of income). It was a good education for me but unfortunately saving is good for long term but is not very helpful in the short term. If you buy a house and pay a mortgage over 25 years, you are a saver. You will eventually realize a return on your property - too late to use it except to provide a room in a retirement home.
The last type of person is an investor. An investor places their capital into areas that will give them the best return. I once taught a course where one of the students had a deposit of roughly $10,000 in the early eighties. She got married, bought a house and twenty years later lost her job, her house and her husband. If she had invested the money in buying the house but rented the house instead of living in it (continued to rent an apartment) by end of 20 years and constantly refinancing and buying additional properties - she would earning enough money to buy new house every year. Investors look beyond the normal behaviour patterns and pursue unusual streams of revenue.
I would recommend a young person to read books by David Chilton and Robert Kiyosaki. Not specifically for the advice (although it is well-founded) but as a way of investing in your own life and teaching your children how to do the same.

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great information
i was a saver and now i am trying to be an investor

About the only good idea that I can suggest has to do with diversification. If you can create a stream of income - take the profits from this and invest into another income stream. Continue to do this until the earnings from all of your streams replace your job income... but don't quit your job until the income from the streams are twice your job income. In this way if a stream dries up, it won't jeopardise your income.