👋If You Wanna Make Money You Must be Prepared to Give it up First

People think that making money means taking a ton of risk. But in reality it just takes one: your money. If you’re able to risk your money, if you’re able to be okay with the prospect of losing what you’ve worked for, then and only then, will you be able to make money. 

You’ve gotta risk money to make money.

Most people work 9-5 earn a stable salary but then they go and put that same money (or what’s left of it) in their bank or in a low-risk (so low reward) investment. That’s if they even invest. (Read here the first thing you should do with your paycheck).

And then they wonder why they can’t fund their retirement aka the most expensive stage of our lives. Instead, you’ve gotta find ways of making your money work harder and harder for you. And I’m afraid that place ain’t the bank! Right now, inflation is hovering above 10% and I bet you don’t get paid anywhere near that amount for holding cash in your bank. I get < 1% in interest. Totally pathetic if you ask me!

Safe stuff won’t grow your money the way you need it to

If you wanna make money, buy back your time and achieve financial freedom, then you’ve gotta take risks. Inflation is running hot. Too hot. It’s chewing away at your cash, as we speak. Cash is a no-no. Unless of course, you’re building up a cash pile to pounce on opportunities! Gotta love a bargain. (Psst: read here why it’s best to buy during bear markets!)

Right now, there’s a gazillion risks when it comes to investing. Firstly. Russia’s invasion of Ukraine and the financial havoc that’s caused (higher energy bills!!) along with the fact that our central banks are so heavily indebted (the size of the Fed’s balance sheet is ~$9trn!) can make anyone feel queasy.

And if a war in the East isn’t enough to give us all a geopolitical headache, the US has literally burst China’s balloon. If only it were a metaphor! Then, we’re grappling with a potential earnings recession and an actual one with real layoffs (read here how to bullet-proof your finances to survive losing your job).

The easy choice would be to not invest. To stay in cash, waiting on the sidelines till things ‘get better’. But lemme tell you this, by the time things get better, it’ll be too late. You’d have lost out. You can’t time markets so might as well be in it that way you won’t miss a thing. (Read here the hidden price you must pay to get the reward from investing.)

You’ve worked for it, now it’s time to put it to work

But despite all this, investing your money (and taking risks) is how you’ll be able multiply it. If you’re already invested in markets don’t think of running for the hills. Think it but don’t act on it! Markets have a way of bouncing back way quicker than we think. 

All the people I know who have made enough money to never need to work another day in their lives have all risked their money. They didn’t play it safe. One told me how him and his wife and him have “enough in the tin”. That investing is not what they need to be doing right now. They’re well in their 80s and they’re enjoying the fruits of their labour. 

He was telling me about one of his investments that he made in the early 70s. The motorway was being extended past Reading. House prices in the towns along the motorway had climbed in price. So he bought a house in the town after Reading, for £18k! Guess what, within a matter of months it had doubled to £36k. He said this was the single best investment he had ever made. Pray that doesn’t happen to house prices now or else we’ll be toast! 

When you’re young, your money has the most time to grow. Use it well

I don’t have a car, have very few subscriptions (this website! And WSJ. That’s it). It’s not fun but if I don’t do that then I won’t be able to invest as much as I’d like. It’s simple: the less I spend the more I can invest. Though read here the paradox of spending – how our purchases will give us the most happiness when we can least afford them.

I’m young which is why I need to invest early so that I can use the time ahead of me to my advantage. If you’re young, grab this opportunity with your hands and feet! Time is like magic for your investments. Don’t waste it. 

I make sure to take on as much risk as I can handle, knowing that as a 20-something I’ll have loads of time for my losses to recover or for my investments to grow in value. I’ve invested in some pretty risky areas (start-ups + bitcoin) and while I know this isn’t for everyone, taking on a little bit of risk acts as a multiplier for returns. I’ve been investing for 2 years – if you’re curious, read here my top 6 learnings and how you can put them into practice today.

Know your time horizon and how much risk you can realistically afford to take and go from there. We’re all different. We all have different hopes and dreams and – different timelines. Don’t worry what other are or aren’t investing in. Focus on what investments are best for you.

Think of your money as your very own workers with you as CEO

But either way, don’t leave your money to its own devices! Aka stuck in a bank. ‘Cause it’ll just die in that place. Put your money to work and it’ll work for you. Compounding doesn’t happen overnight. Have enough conviction and patience to stick it out. You won’t regret it. 

It’s forever fascinated me that a lot of rich people have terrible cash flow. They don’t like holding onto too much cash. Every penny they have is hard at work for them. Building their future. It’s tied up in investments from stocks to property to artwork; not sitting in a bank gathering dust, losing returns.

Because money that isn’t working is no use. It’s gotta be working. As Warren Buffett says: “If you don’t find ways to make money in your sleep, you’ll be working till you die”. 

The thing is, we hate losing money. So much so that it turns into a fear. We don’t want to invest it since we can lose it. And if we lose our money, the $$$ we’ve worked so hard for, there’s a real chance we’ll quit.

Instead, switch your mindset. See that in order to win you have to lose a little. Learn to see those losses as part of the bigger picture. Losses are a sign you’re doing it right. If you didn’t have any losses it’d mean you didn’t risk enough. No risk = no reward. Just make sure you can handle both sides of the equation.

So, dear reader, while you shouldn’t invest more than you can afford, don’t be scared to risk what you can afford. 

That’s how money is made. Now go make some!

Disclaimer: This blog is not investment or financial advice. It is my opinion only. This blog is not a personal recommendation to buy/sell any security, or to adopt any such investment strategy. Always do your own research before you commit to any investment.