Compound Wealth Insights #1
Kanishk Swarup
Guiding busy working professionals with young families to become financially free!
Hello and welcome!
I've been sharing my insights about financial planning for a while now and I'm delighted to start sharing those insights with my LinkedIn network too. My goal is to share information that helps you to make better financial decisions. If you like what you see, don't forget to subscribe! :)
Let's get into it...
UK Inflation
Inflation has hit 9 per cent, its highest level in more than 40 years after soaring gas and electricity bills has intensified the cost of living crisis facing households!
At this rate, ￡100k of cash savings would only be worth about ￡39k in 10 years' time! And all of us will lose 60% of our post-tax cash savings in real terms at the current rate of inflation.?
Making your money work harder is no longer a luxury or a nice-to-do. Having a structured financial plan and taking proactive steps is the ONLY way to achieve financial security and financial independence.
This is a super interesting chart showing the Buying Power or $1 over a 200 year period.?
From 1800 till the end of World War 2, we can see that the value of $1 fluctuated but broadly kept its value due to the Gold and Silver standard.
However, from 1935 onwards the purchasing power of the $ has been falling consistently due to the excessive money printing by the central banks across the world!?
This is the reason legendary investors like Ray Dalio say that surplus 'Cash is Trash'!?
We can see that our cash in the bank is earning between 0-2% max. But, with inflation at 9% - we are guaranteed to lose 7% every year.?
I believe it is critical to understand the suitable options for making your savings work harder if we aim to become financially independent.?
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Investors' Chronicle Panel Discussion
Last week I was a panelist at The Future of Private Investing event by Investors' Chronicle. We spoke about 'Investing for income: the secret to steady revenue streams and sustained returns'.
One interesting point that was discussed was the idea that no matter how much money people earn, they tend to spend the entire amount. This is also referred to as 'lifestyle inflation' - as our incomes increase we get bigger houses and nicer cars.
My thoughts on this are that if you have enough disposable income to support your lifestyle then any surplus should be invested to leverage the power of compound interest. The best way to do this is to automate your savings and investments. Just like we automate paying our bills via direct debit, we can automate our savings by setting up a direct debit for those too. This way you'll save first and spend later, rather than spending whatever you like and only saving what's left over!
Compounding takes years and years to work. Yes - YEARS!
In order to preserve and grow long-term wealth, we should double our efforts on saving and investing more rather than taking riskier bets in such a challenging environment.
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Thank you for reading
Kanishk Swarup | Financial Planner and Wealth Adviser | [email protected] | Founder of Compound Wealth Planning, a Partner Practice at St. James's Place.