Although we talk mostly about investing in the stock market here at The Motley Fool, personal finance and investing are two sides of the same coin. Before we can start investing, we need to learn how to save. Before we can learn we save, we must first learn to earn. Before we can learn to earn, we must first learn to envision.
This is what the book “Think and Grow Rich” by Napoleon Hill has taught me. The book is one of the most influential financial books of all time. It certainly lives up to its name.
Although the book does not talk about investment techniques or valuation tools, it talks about one of the most important aspects of long-term sustainable wealth creation.
Before we start saving, investing and work towards financial freedom, we have to first envision ourselves to be a successful and wealthy person. If we are unable to train our minds to see ourselves as financially free, we might subconsciously sabotage our own plan during our journey towards financial freedom.
Let’s say we are planning to build up our portfolio and we are starting off with a figure of $50,000. We then invest and manage to double our portfolio within the next five years. Now, our portfolio is at $100,000. If we continue to invest and can double our portfolio every five years, we would have reached a portfolio size of about $800,000 in 15 years’ time.
However, at the moment when our portfolio was at $100,000, if we decide to cash out half the amount due to fears that we might lose money during a market crisis, we sabotage ourselves by reducing our portfolio back to $50,000. If we continue to do that every five years, we might end up with only $250,000 at the end of 15 years.
Due to our insecurity, we would have lost the benefits of compounding. However, if we had the correct mentality right at the start, more than half the battle is won.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.