Growing vs Saving

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I have $5k in the bank, now what? Most of us work for a living and in the process we manage to tuck some of that away into an account somewhere. What we do next can change our lives.

I’ll use this analogy from farming:

If you are given a hundred bushels of wheat, you have a few choices. First you can get rid of the wheat, sell it (use it) then you get something in the short term but it’s gone. No more wheat. This is like spending your money. We’ll ignore the fact that you get money when you sell wheat, we don’t want money in this example, we want wheat. Money represents some kind of goods or services in our imaginary, wheat-driven world. Your second choice is to put that wheat into a grain elevator and save it. If you put 100 bushels into an elevator, you have 100 bushels, easy math. Next year you’ll still have a hundred, and so on and so forth; if you add another hundred, you’ll have 200. Lastly, you can plant your wheat. This takes time and has some risk involved.  There might be a drought and all the wheat might die, leaving you with nothing. Ouch. But if you check the weather forecast (market indicators) you can increase your chances of avoiding such a calamity. What’s more likely to happen is that wheat grows up and produces a yield. One hundred bushels of wheat can turn into a hundred thousand. Or it can burn up in the summer sun and turn into nothing. Or it can land somewhere in between.

I’m not a farmer so these numbers are made up, but you get the idea.

In the example, we see the three choices people face when they have money, spending it, saving it, or investing it, respectively.

If you put money into a savings account, it’s going to stay there. But if you grow it via smart investments, it will multiply. The question is, how?

When I was in college my friend took $8,000 and bankrolled it into a poker account. He invested in himself and his ability to play cards. I remember his words “everyone is going to have a few thousand dollars saved up at one point, what they do next is life changing. Most people use it as a down payment on a car or something and get into debt. What’s smarter is to invest it.” It worked out well for him as he turned that into a career and became very successful, branching out his investment into business and real estate. Everyone has their own way to grow their money, but regardless, much like growing wheat, it takes time and effort. There’s also risk involved. Risk that can be mitigated with training, study, and understanding, however.

The key for my friend is that he found his “thing.” For him, it happened to be Texas hold’em poker Seems like a no-brainer, but why don’t more people do it? Why don’t you?

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