At first, it might feel strange to take away money from your saving account for the first time to start investing it. It's against some second nature. With a second nature, I mean, this is something we learned from our parents that our money is the most safe when it is in our bank account. What I asked myself was if the way I was taught is in fact the best way. In the time that our parents had a savings account, the interest was much higher. It made some decent money back then. But now, if you would have saved some money and put in your savings account and left it there to sit over years, I strongly believe that the inflation and interest simply outrun each other and would leave you with a loss. This is not really 'safe' for your money, is it? This is strange. Is it even safe to say, that when you have money in your bank account, you are losing money to the bank. For example: I pay €7,50 every month for my bank account. And I receive around 0,10% interest on my "FREE" saving account. Doesn't that mean that I need €100,000 on my saving account to make a profit? And that doesn't even take the inflation in account. You do the math. But ask yourself the following. Why did we learn to save money? Why don't we learn to invest?
Ok. Let's imagine a child, who is getting a candy. The child is being asked, if he wants to eat it now, save it for later or give it back to the man and get two candies instead. I believe that our nature would tell us to save it for later. Because we believe that we are not going to lose more that we just gained. Eating it now, would be, unnecessary in a way. For instance: If the child has eaten the candy already before he simply could think about it, because he was asked a question and doesn't want to be too greedy, but oops. It's in his mouth already. And it tastes wonderful. This psychology is very relative to our way of thinking about saving our money or investing it. I believe this is an important difference between different types of entrepreneurs. This separates a lot of people from being an investor or a saver, and a successful from an unsuccessful entrepreneur. If you understand this principle, and project it on yourself you should see and tell what you need to change in order to be which one you want to be.
This goes for a lot of principles in life. Even when you are tempted to do a purchase, for example while you are walking trough the IKEA. You should know that every product there is placed in a way to make you believe that if you don't take it now, and put it in your basket, you will lose a great opportunity to own this product for a great value. But let's be honest to yourself.. What was the real reason to go to the IKEA? Did you need to buy furniture? Why are you buying a plant that might just cost €0.99? If you are like me, you are tempted. You hold it in your hand and feel the urge to take it with you. Who cares, it's only €0.99 and you like it! Right? Well. No! Put it back. Don't buy it. You didn't need it before and you don't need it now. Let’s be honest did you even need that furniture you where going to buy? And why are we even going to the IKEA in the first place? I know the answer. And you do too. It's because we like the way the store sells us things. It's like an addiction. A buying addiction!. It makes us feel great. Every time you walk in a shop, you are feeling like the smartest person on the world. Because spending gives a feeling of accomplishment, like experience points (XP) in a game, but without the great sound of the coins dropping on the ground when you use your credit card. And it releases a lot of dopamine and adrenaline in our brain. And because of the psychologist Robert B. Cialdini (read his book Influence), you think that most prices are special (cheap) prices, customized for you personally. But painfully enough, you forget for one moment, that almost every person in the world owns the same furniture! Well don't feel sorry for the last years of fall back after reading this. Just see it as a moment of 'opening' your eyes. Next time you get a candy from a giant man called IKEA, think before you decide. Eat now, save it or invest.
- Small note. I love IKEA! Great shop and concept. There is so much to learn from their marketing team! It's amazing.
Take this small story in mind, the next time you walk trough a store. Try and recognize your temptation to buy and the associated feeling. After sorting out my feeling about my savings account. I took al my expenses and income, and subtracted it from each other. I found out that I could set a new saving goal when I stopped spending so much money. Instead of saving only € 250 each month. I stopped smoking, as a matter of fact I stopped a lot of spending. And after a week, I managed to change my goal to save € 1000,- every month and put it on my broker account. Wow! (XP moment there!) As I suggested in my other article, it's a good idea to do this monthly and automate it. (Less XP, but more to invest. Believe me!) So you don't forget to wire transfer it to your broker. There are many reasons for doing this. The most important thing is to protect yourself from this urge to buy. So first do the smart thing and invest. And then allow the broker to work for you.
Unfortunately there is still a strange feeling attached to see your money turn into more money. Today I watched my broker account hit the first € 60,- profit mark with my freshly saved money. It's hard to describe. But the best way to describe it would probably be to say that it feels like a relief and a rush at the same time. And there is nothing more fun to see it pay off! I’ve made my first profit! And for this small amount of time, I believe that €60 from my €5000,- savings isn't that bad at all! But still, it almost feels the same like walking through the IKEA and buy cheap furniture. Do you see my point?
For this post I want to thank Floris and Lana for the help with my grammar and English.