Why you have to start investing today

Your money looses value every day and pensions won’t save your retirement. Start investing today.

  • Every year your money looses value
  • Your pension is not guaranteed
  • How do I start investing

Your money looses value

This is due to inflation: This is the rate at which the average level of prices for goods and services is rising. Therefore, the purchasing power of currency is falling.

On average your money looses 2 to 4% per year based on the global inflation rate index. You can monitor the inflation through indexes like the Consumer Price Index (CPI).

Graph, Buying Power
Graph, Falling Buying Power

Let’s assume you have 100 units of money in your account (eg. $100, €100 or £100 – currency doesn’t matter) . It looses buying power every year. With an inflation of 3% it looses 3% every year. Every year things become more expensive due to inflation and down the line your 100 can buy you less.

Graph, Money vs. Risings Costs
Graph, Value of Money vs. Risings Costs due to Inflation

Why is inflation happening?

Many factory play into this. We can’t expand on all of them but the most important theories around this are the cost-push and demand-pull theory. In short; prices rise because the demand for goods and services rises more rapidly than an economy’s productive capacity (demand-pull) or when prices of production process inputs increase, for example through wage increases or rising raw material prices (cost-push).

What can I do about it?

That’s the right question to ask! Here are the straight-forward questions:

  • Get an annual pay-rise that’s higher than the inflation rate,
  • Save more money than you are “loosing” to inflation or
  • Invest your money and get an interest higher than the inflation rate.

The first option depends on your career and job: Can you out-earn the inflation just through a rise in your pay? You will probably have little control over it other than doing a great job and hope to be rewarded.

The second option is the default for many – simply save money. But since your money is loosing value every year you would need to increase your annual saving rate too. 

My favourite option – and strong recommendation – is to invest your money. Let your money work for you. And at least at an interest rate that is higher than the inflation rate. You need to take tax into consideration as well. That’s why you have to investing today

Graph, Investing Money vs. Rising Costs
Graph, Investing Money vs. Rising Costs

Here we see the comparison if you invest your 100 “something” ($/€/£) for a moderate 5% interest rate per year. This increase in value of 5% per year outpaces the 3% inflation rate of our example.

Your money keeps its value. But on top of that, your money is growing in value – even vs. the inflation.

Your pension is not guaranteed

Even if you live in a country that provides pension, it’s not a guarantee anymore. This safety net set up by the government has holes. The social security is already under a lot of pressure – and it will get worse. It’s very likely that soon the governments can’t pay out a decent pension to its citizens anymore. 

What can I do about it?

  • Get a pension plan
  • Invest for your retirement

Getting a pension plan, or retirement plan, is usually a great idea if it’s sponsored or subsidised by your employer.  Even if it’s not supported by your employer it’s probably a good idea. Often they come with tax benefits and other advantages. 

However, investing for your own future is my recommendation here too. Maybe in addition to a pension plan. But l strongly advise to look into it yourself. 

Why you have to start investing today? The earlier you start the better it is.

Get started with investing

I am not selling you anything, no worries. I just have this online course… just kidding.

Great and practical advice on where to get started can be found here on the site of Mr Money Mustache.  He shares a good amount of advice on where to start.

I do not provide personal investment advice and I am not a qualified licensed investment advisor. I am just an investor who’s trying to help others by inspiring to get educated in this field. 

Sometimes life is like Tetris

Do you know the feeling when you played something for a while and then stop. You go back to the real world but your mind still applies the same thinking patters like in the game? You brain still recognises shapes everywhere and tries to stack objects?

Since games often consist of obstacles and problems thrown at the player, you can be stuck in that problem-solving mode. Your brain might take a while to transition back.

Recently, when I finished a session of rapidly falling blocks, I still had the visuals in my head when I switched from the game to a conversation. My inner eye could still see the shapes and patterns in front of me. Until my brain finally ended up back in reality.

That’s when this metaphor came to my mind:

Sometimes life is like Tetris

You go through life and collect non tangible things sich as experience and connections. Let’s envision them as blocks for now.

Then you move through life and collect more and more; education, training, certificates, jobs. All make up building blocks of your life. And you build layer by layer.

Sometimes it fits perfectly and your CV is perfect and you land that new job. You align a full row (called Tetris in the very same game) and it’s great.

Other times it doesn’t fit as nicely; you don’t land the job you wanted or a project derails. Its like you’ve built a stack with gaps and can’t complete the row. Things seem to go haywire.

As you go along more blocks are thrown your way. More opportunities come along. And quite often there comes a series of blocks that just match wonderfully! This one goes here, that one over there. Boom, Tetris!

Building blocks of your life

In my mind I see the blocks as your achievements, jobs you had, people you met, a business you build, networks you create.

Sometimes things don’t seem to add up or don’t see to go the right way; the new role you got doesn’t fit into your career as expected, that Side-project you started doesn’t seem to lead anywhere.

And then there it is, the 1×4 block that will save the day! It all makes sense now; you met someone through the job you started and later you start working on that side-project of yours together and it’s great!

I’ve seen that in my life too: did something here, then there, worked on this then that. Years later I got to use it all again in my own business. The blocks fell into the right places. Tetris!

What am I getting at?

  • Blocks coming at you are new opportunities
  • Don’t wait for the one piece forever, use the blocks you have
  • You have to keep playing to find opportunities

Your invisible prison

The other day I was in an aquarium. Don’t judge me, it was the only thing to do in that place. I watched the different species of fish for a while and pretended to be interested in the facts provided on the information boards.

On the way out I looked at a giant shark tank – a real shark tank, not the TV show. I thought: “Poor animals, they are not free to go where they want.” A blink of an eye later my train of thought came to a ear-numbingly screeching halt at another thought: am I really free?

We all might live in our own invisible prison: the walls made of limiting beliefs, work or personal situation. The bed is made out of a foul mood or bad habits.

How do you break free of your own prison?

  • Firstly you need to realise that you are stuck or in a bad spot.
  • Then you have to have the will to change it.

The key to leave your own prison is your mindset: if you can change it you can change your approach to things. Remove limiting beliefs, change the situation you are in. Improve your mood and replace bad habits with good ones.

Mistakes and failures

Avoidance vs. Mistakes vs. Experiments

Where I grew up it was all about avoiding mistakes and failures. Everything and everyone seem to have told you: “Plan ahead, don’t do something stupid. Don’t make a mistake, it will look bad on you.”

Later in life I came across the mentality of making mistakes, plenty of mistakes, the more the better. Best known as Silicon Valley’s “Fail Fast” mantra: Fail, move forward and fail again. Learn from it. One of my favourite saying for a while was “It’s only a mistake if you don’t learn from it”. I believed in it. 

Mistakes and failures – could it be a good thing?

But does everything need to be a mistake? I think I like the approach of experiments better. Do lots of experiments, small ones and big ones: Test which website converts better. Test what works better in a business pitch. Test out where you like living. Try things in a controlled way. 

Do experiments instead of mistakes

  1. First of all, it does not sound as negative as failing or making a mistake.
  2. Secondly, it’s controlled. You are in control and any outcome is a good one because it’s an answer.
More Business & Entrepreneur Posts

My year of charity — and why it failed

In 2016 I wanted to run an experiment I later called “my year of charity”. The goal was to support a good cause every month for a year. I wanted to spread the donations across different charities and regions. In this review you’ll get to know about the…

  • Challenges I faced
  • The positive impact and
  • Why I failed to finish the year

First hurdle — how to find a ‘good’ charity

Where to start? Let’s find a charity that is doing a good job and a cause I would like to support. After a bit of research I realised it’s not that straight forward: the charities differ in how they represent themselves.

It starts with the information that’s available online – or rather the information that is not there. Like with regular companies, some websites are better than others. Of course, you can’t expect those organisations to blow a lot of money for online marketing or SEO, you want them to spend almost 100% on their cause. But how would you and I find out about them, get to know what they are doing and get to understand the impact they are having if those things are not easy to find or represented in a good, modern way? 

Second hurdle — how to measure impact

My investor mindset made me asses the impact my donation would have in a specific way: Investments are measured by ROI (return of investment) – how much your money you will get back. For a charitable cause you don’t expect to get something back for yourself of course, but you want to make sure your money is spent wisely and effectively.

In the end it comes simply down to how much money is really spent (the money you donated minus the cost the charities face) on the things you want to support (for example the environment) and what it turns into (for example number of trees planted and amount of CO2 absorbed). If you look for these kind of measurable outcomes it allows you to compare the charities with the biggest impact.

This is not the only way to measure efficiency but for my approach I needed something straightforward to work with; I wanted to donate to several causes and needed a way to help me make a decision. 

Third hurdle — payment

I did not expect this to be a problem but the payment experience differs greatly. I would have liked some options to choose from, including PayPal or Debit and Credit Card. But it’s not a given that all or any of those options are available.

Some only offer bank transfer. Others offer debit and credit card but via an unsecured connection – that’s like sending a postcard with your card details via mail, hoping no one reads it on the way to the recipient.

Success by the month

Good news is that I found some really great charities over the months! Here is the detailed view, month by month

  • Tree Aid in January
    • 1 Watering Can
    • 1 Bucket
    • 1 Mooring tree donated
      • providing nutrition and medicine with lifespan of around 20 years
      • grows over 2 meters in 3 months
      • filters 20 kg CO2 per year
      • 400 Kg CO2 emission averted (over lifetime of 20 years)
  • Ripple Africa in February
    • 2 cookstoves 
    • saving 2 households 67% on firewood
    • preventing severe burns for the families
    • improving health of around 10 people 
  • SolarAid in March
    • 7 solar lights 
    • 44 people accessing these lights
    • £900+ saved for families*
    • 8,000+ extra hours of child study time*
    • 3.8 tonnes of CO₂ emissions averted*
    • 25 People experiencing better health
    • (*over the lifetime of the solar lights)
  • Pur Projet in April
    • 6 trees planted
    • 500 kg CO2 filtered over the lifespan
  • Practical Action in May
    • Renewable energy project in Peru
  • Picaflor House in June
    • Art material for 40 kids for a month
Graph
Graph

Summary of the impact

  • 7 trees donated and planted
  • CO2 offset = 2.8 tonnes over lifetime of trees
  • CO2 averted = 3.8 tonnes over lifetime of solar lights
  • Renewable energy generated (unknown)
  • Families life improved 10
  • Kids supported 40

Summary of my findings

  1. The field of charitable organisations is quite segregated. There are only a few standards, they can differ greatly between countries and not all organisations follow them
  2. It can be difficult to do research on a charity. Sometimes the information they provide is limited or has gaps, making a background very hard.
  3. Charities measure their success differently and it’s not easy to compare the impact they have when it comes to quantity or quality. 
  4. The payment experience varies greatly.
  5. There are some great charities out there with people doing great jobs. Very inspiring.

Why my year of charity failed

After only six months I stopped my year of charity. It was not a decision I made one day.  It was something that slowly happened over time. Normally I would have a reminder popping up every couple of weeks to get working on the next blog post: research, find a charity, do background checks, decide, donate and blog about it. Not complicated. 

It went well for a while. I’ve found exciting projects to support; researched, donated and wrote about them. But then life got in the way. Some other things took priority. Every now and then the research or writing the blog post was postponed. At some point I was over a month behind. It was so much to do just to catch up and then to prepare the next months. It felt so overwhelming that I did not get anything done and stopped.

I never talked about it. I only posted the monthly blog posts but never this review.Here it is now, over two years later. Oops.

What did not work for me

In hindsight it’s easier to say why I failed at my own project. I think these are the reasons why I failed at it:

  • I am not naturally a writer so it felt hard to write something, even a simple blog post.
  • I dit not have a good routine or workflow in place. Today I know how useful a good routine or habit is. 
  • I could have chunked down the big tasks into smaller, more actionable ones to make it less overwhelming.

You can help me now

I am thinking of a way to fix this. I am working on a new project called “Futual”. Join me in saving the planet. If we fail this we are all doomed.

Help me saving the planet

Photo credits to unsplash-logoIsaac Smith and unsplash-logoKat Yukawa