We often make bad decisions based on poor quality information. Sometimes we have too little information, and sometimes it is too complex or confusing and incomprehensible. It can be too hard to digest. Often, we cannot foresee the full consequences of our choices. It is especially hard when you must decide now, and accept that you’ll only see the outcome many years later. Statistics show that when it comes to saving money, most people save truly little, even if they know this can cause trouble later. When we lose income or have unexpected expenses beyond our ability to pay, we become angry about our past decisions. But then it is too late.
We can only make good decisions when we have and can process the right quantity and quality of information, especially when we have long-term goals rather than short-term ones. Many financial products are complex. For instance, think about a loan; there are many diverse types of loans. The complete information is often not laid out in plain sight, and you need to read the entire contract. Usually,
it is hidden in the small print at the back of a brochure or the bottom of an advertisement.
Therefore, you need an effortless process focusing on small but smart choices consistently and over a prolonged period. They add up in a nonlinear fashion over time: that’s the so-called compound effect. For
investing, that means we need to set aside a small amount regularly (consistently and without making any excuses) when we earn an excess of money above what we spend (let us say for all the forty years of our career life)—this is regular contribution. The next step in the process is to invest that surplus money wisely, and in strict accordance to our investment plan. Then you must let it yield the desired compound returns by patiently allowing it to grow over time. You must stick to your investment plan, execute it with discipline, and let time do its magic so your investments can compound.
Become Wealthy = Regular Contributions + Investment Plan + Time
The key to becoming wealthy is having a plan and executing it for a long time!
(1) Regular contributions: Save every month.
(2) Investment Plan: Plan, invest and manage your portfolio, diversify well, keep costs low, and rebalance on a regular basis
(3) Time: Keep calm and have patience
