Generating wealth by saving every month

in LeoFinance2 months ago

Many of us dream of having enough wealth to buy whatever we desire. However we just continue to live our daily lives and spend our money without thinking.

So what would happen if people decide to save a small amount every month and let that money work for them? I believe by doing investing a small amount every month you can generate huge returns. If you don't have the huge capital to generate returns, time can help you.

Letting your money work for you

Compound Interest is the way we let our money work for us. Some people may not realize it but the interest we get from the bank is essentially compound interest. The stock market, banks and passive income are possible ways to generate this compound interest.

Investopedia compound interest image
image credit

Just by looking at the image from Investopidia, you can see how your your initial investments keeps increasing over time and help you on the way to generate wealth. As each year passes, the returns become greater even though the percentage has not changed.

Calculating your expected returns

So what would investing $100 a month give you? It would depend on how your expected rate of return. For my example, I am considering $100 a month with zero initial capital and I use this compound interest calculator to simulate how much money we would make.

I created the chart below by inputting the values into the calculator. You invested a total of $36,000 but your wealth is now worth $193,392,83. This is because the money invested in the past is continuously earning you more money. So if you decided to not spend money, you would of made over 500% of your initial investment.
compound interest chart.png

Passive Income on HIVE to create compound interest

There are many ways to generate interest on your investments in HIVE and this includes the usual HP, HBD and the other second layer tokens on Hive Engine.

HP is probably the easiest way to show how it can be made to compound your investment. It has an inherit interest of 3% per year. However you can also generate more interest on your HP by curating content or delegating it away to dlease if you don't wish to curate. You can read more about how to use dlease in this post.

HBD has also has interest now and it was announced here. Also dividend tokens like UTOPIS, EDS, SPI, EDI, LBI and many more also pay out dividends. These dividends generally tend to increase over time as part of them are re-invested to generate more returns and the other part is split to token holders. This means you could use your dividends to increase your share of the rewards and you may also see appreciation in the underlying value of the token.

Risks

Every investment has a risk and some are more riskier than others so you should always do your own research. You can't predict the future and sometimes projects or tokens/stocks die. But by investigating, you can find the investments that suits you and limit the chance of investing in a bad project. As always, you do not need to in a rush to generate wealth but saving a little bit of money each month will make this process easier.

Posted Using LeoFinance Beta

Sort:  

It looks like you have an advantage when I post a Math challenge problem about compound interest! 😆😅

I find compound interest to be easier than calculating geometry or the trajectory of an object LOL. Well the DBuzz mini-quiz should be soon and this time its only 7 days so I should be less tired.

Posted Using LeoFinance Beta

Thank you for this explanation of the how money (or any assets) can work for you - it's really good to see how a regular, fairly small, amount can add up over time.

There's the other end of the equation as well: what passive income will your total savings pot yield as a retirement income?

Posted Using LeoFinance Beta

That is an interesting question. I'll put it on the list of things to write about in the future (maybe for a future contest). What I did here was assume that it took everything you got back as an investment. There were a few people I followed who talked about how much of you were allowed to take out to make it sustainable but there were varying numbers.

Posted Using LeoFinance Beta

It's interesting - because as you withdraw income, what remains continues to compound. I found that if I didn't arrange to withdraw sufficient income the final (like, I'm dead, final) amount could be more than I'd benefitted from! That could be fine if you have beneficiaries, but if the state takes it 😱.

I like the idea of saving. You can go wrong in saving!!

Yes saving money will definitely help you down the road. It's best if you can put the money to work so it earns you more money. This is why I keep increasing my stake for curation purposes and why I am also investing in dividend related tokens.

Posted Using LeoFinance Beta

Good move, @jfang003!!!

One of the biggest advantages to Hive is the no fees when it comes to investing. That is a way to eat into long term returns, especially when you consider the fact that traditional investments yield only a few percent per year.

Posted Using LeoFinance Beta

Yea I definitely agree. I forgot about the fees when writing the post since I was also thinking of the normal stock market. Maybe because the mania there is so high, I have been finding the added premium a bonus when selling some covered calls. So I was thinking more along the lines of more than a few percent per year and along the lines of 10%.

I wonder if we are truly going to get a unrealized capital gains hike there because it would probably shift me away a bit more from the traditional markets.

Posted Using LeoFinance Beta

Still looking for the best way to generate passive income....for now I am thinking about lending out my crypto even though it´s not much

Posted Using LeoFinance Beta

I think right now UTOPIS is looking nice and I like that its current APR is like 90%. As for whether or not it will maintain this level, I do not know. I only bought a few of them but I really do wish I bought more of them.

If you want to lend out your crypto, then I suggest looking into brofi. I am still waiting for a few more days for the votes to even out but I like the idea of slowly earning some dividend tokens. The stats will determine whether or not I will delegate more into the pools. There are way too many options on HIVE so I would pick a few you believe in.

Posted Using LeoFinance Beta

Thanks really appreciate the feedback!

Congratulations @jfang003! You have completed the following achievement on the Hive blockchain and have been rewarded with new badge(s) :

You published more than 250 posts.
Your next target is to reach 300 posts.

You can view your badges on your board and compare yourself to others in the Ranking
If you no longer want to receive notifications, reply to this comment with the word STOP

Your current Rank (31) in the battle Arena of Holybread has granted you an Upvote of 24%

!SEOcheck

Posted Using LeoFinance Beta

Title is of good length- Perfect
Permlink is of good length-Perfect
Header 2 found but Header 1 not found- Add H1
Image available-Perfect
No link between title and Header-Try to use same keywords in Title and Headers
Internal link found-Perfect
External link found-Perfect