Hello,
It’s me, Torben, the one that has no clue about what cryptos are!
It’s before it all started for me. Well I heard about this Etherthingy, this “not-Bitcoin-thing”, but beside that I was completely clueless about cryptos.
Let’s do a little recap from when I’ve talked about “What to do before investing into Cryptos”, and I think I had to write about it, we needed a base from which we can work: We now have secured our living standard, ensured investments won’t fire back and finally we have some money aside to work with. About this money and it’s potential I’ll talk about today.
We have money we don’t necessarily need, and this is pretty nice already, we could for example go to the cinema with it or buy our girlfriend(-to-be) some flowers. And all this is completely fine in my opinion to do, but with our set goal to become financial independent or maybe even enjoy financial freedom, this money has one purpose: GROWTH.
First start with analysing the current state. If you followed my instructions you now have 10% of your monthly income on the side, we assume this to be 100$, this is just for making math easier, if you have more or less, this will surely matter but it will still prove my point.
So you now have 100$ a month aside, you most likely have it in a bank account in some way or another. If you are lucky, your bank provides you with 1% annually reward. This is nice, isn’t it? You have more money then before? Sorry, you don’t! While you indeed have more money if you just looking at the numbers you 101$ are now worth less.
The Problem is the inflation at the same time is usually around 3%, this means that after just one year it will be for every 100$ now 103$. Well, you may not care, 101$ are still more then 100$ and technical that’s right but your 101$ are now worth less then the 100$ last year, because people are less willing to give you something for it.
Still not understanding it? Let’s take an easy example: You may have heard of the Republic of Weimar, this is one of the common examples for inflation. After WWI, the Reichsbank printed enormous amounts of money, in the peek the money in circulation doubled each second day, this resulted in the money getting to its real value, the paper it was printed on. And so People did funny things with the money like burning it to heat their homes up or giving it to children to play with.
This means your 101$ now are maybe technical more than the 100$ last year, but they are not worth more, you can’t buy as much as last year with your 101$.
This difference seems maybe not that big, I included a Google Tables Document that shows how much of a difference it becomes over time.
If we look at this, if we don’t do anything we will lose more than 20% of our money in the next twenty years. Horrifying!
But luckily there are plenty of solutions to this, and this is where investments get handy.
Let’s say we find an investment that will give us 10% each year, this is possible and soon I’ll show you how. Again we’re assuming we get again 100$ each month for investments, this is 1200$ a year, after just one year you’ll have 120$ for free.
Now it becomes crazy because we’ll let 120$ stay where they are and this way we made 1320$ this year (1.200$ + 120$ = 1320$). And this now again after one year get 10% on top. Now you will end up with 2.772 $ (1.320$ form the start 1.200 10% of your income and 10% on top) , after another year you’ll have (2772$+1200$)*1,1=4.369,20 $.
What do you think you’ll have after 20 years?
After 20 years you would have 84.483,30 $, which is 59.283,30 $ profit.
Again, look at the spreadsheets second table (button on the bottom) to use your own numbers.
Imagine just for a second we’ll find a way to make 50% each year, still possible inside of crypto, what would you think how much money you would have?
After 20 Years your 24.000$ you put at the side are now worth 17.952.786,34 $.
~18 MILLION DOLLAR
This is the true Power of crypto currency’s (as an investor).
If we find a way to maximize our percental growth, we can become a millionaire.
Let’s become a millionaire!
Torben, not into crypto yet.
PS: I am writing all this because I think It is important to setup an investment mindset, no one should go and just start investing, without knowing his stuff. Next time I’ll finally talk about my first investment :)