Financial Literacy: The Key to Making Your Money Grow

For individuals who have accumulated wealth but are unsure about how to manage it, financial education is crucial. Inflation can erode the value of money over time, but a lack of knowledge on investing can accelerate this process.

Bozhidar Balevski, a renowned financial analyst and founder of a personal finance and investment training platform, emphasized the importance of financial literacy in a recent episode of the Alexander Kadiev The Career Show Podcast on YouTube.

Understanding Inflation and Its Impact

Inflation may seem like a slow process, but its effects can be significant in the long run. According to official data, inflation rates in many countries are around 2-3 percent. However, this figure may not accurately reflect the actual rate of inflation. To gauge the impact of inflation on your finances, divide 72 by the inflation rate. For instance, if the inflation rate is 10 percent, the calculation would be 72 ÷ 10 = 7.2. This means that in 7.2 years, the value of your money will be reduced by half.

The Power of Returns on Investment

The same principle applies to returns on investment. If your investment yields a 24 percent return, dividing 72 by 24 gives you 3. This means that in three years, you will have recouped your initial investment. By grasping these simple concepts, individuals can make informed decisions about their finances and set themselves up for long-term success.

Knowledge Before Wealth

Many people believe that saving money is the first step to investing. However, this approach is misguided. Financial knowledge is essential before accumulating wealth. Without a solid understanding of personal finance and investing, individuals may struggle to make the most of their money.

As Bozhidar Balevski emphasized, “First comes the knowledge, then comes the money.” By prioritizing financial education and dedicating time to learning, individuals can set themselves up for financial success and create a brighter future.