Many individuals use the terms savings and investing interchangeably, they are not the same thing. Saving is when you put your capital straight into a low risk low risk investment like a savings account or a high interest capital market account, where there is very little risk to the funds you have to invest.

Investing is when you’re placing the money you have to invest into an asset which may do up or down in value, for return higher than a high interest savings account, in return for taking some risks.

Investing is when you are using your savings to decide on and purchase an asset that you anticipate to increase in value in the medium to longer term, enhancing your capital value. This asset may go up or down in value, but will generate a return higher than that of a savings account, in return for taking some risks. Investment decisions are normally based on basic principles of that asset that are investing in.

Putting income into a high interest account to buy a car is saving your money, whereas putting your currency into a unit trust or a mutual fund to generate a nest egg sometime in the future is investing. When you have cash to invest, you should normally always seek some professional financial advice before you make any big decisions.

Investing vs Trading

What is the difference between investing and trading? Sometimes they use these terms interchangeably but they do mean completely different things. If you are a serious about controlling your very own cash and the risks associated with it, you require to understand the difference between these two terms.

With trading, the biggest difference is the time frame. Traders are typically very short term investors, at times buying and selling their positions on a daily basis and sometimes more than a few times in each day. They will generally make investment selections based on charts and the trends they are predicting and they are sometimes called chartists. Day traders also try to time the market, buying low and trying to sell high, quickly and as often as possible.

Money really is a mind game.

A University of Maryland study examined the “denomination effect”.

The study found that if you carry around big bills ($50s and $100s) you’ll spend them slower than smaller bills.

Would you break a $50 or $100 to buy a pack of gum or a cup of coffee? Even if you would, my guess is you’d think about it just a bit longer than if you had to break a $5 or $10. It might even “hurt” you to break a big bill.

And here is the most interesting part of the study: People who break big bills ultimately end up spending that money faster than people who started out spending smaller bills.

Learn How to Be free from debt Today

Setpoint

Merriam-Webster defines setpoint as: “the level or point at which a variable physiological state (as body temperature or weight) tends to stabilize.”

I would argue that there is a big psychological aspect to “setpoint” as well.

That 5’5” guy who has been 250lbs for many years will probably find a lot of success when he first gets serious about diet and exercise.

At some point though, his brain will point out to him that he USED to be 250lbs. “That one extra box of donuts won’t matter….it’ll be a nice reward for losing so much weight”

And before he knows it, his weight is creeping back up to where he was “comfortable”.

The same can be said for money and debt.

Why millionaire sports stars end up bankrupt

According to a Sports Illustrated story , 78% of former NFL players are bankrupt or under financial stress within two years of retirement, and 60 percent of former NBA players are broke within five years of retirement.

Many lottery winners are in a similar position just a few years after their big win.

Why?

Books have been written on the subject but part of the answer comes down to their psychological “setpoint” about money.

Years and years of carrying the same credit card debt can make someone very comfortable with a certain amount.

It’s the most common thing I hear from students. “I invested in “How To Own Your Paycheck Again!” and I was doing so well…”

You’ve chipped away at your debt and 40% is now gone. You’re justifiably proud of yourself. That big screen TV would only add 10% to your debt and your deserve a reward.

Since that 10% would keep you under your original debt “setpoint” you go for it. And before you know it, your debt has crept up back to your comfort level.

So how can you develop a new setpoint?

Prepare for challenges.

You’ve lived with yourself for awhile now. Where do you usually stumble?

Take a small percentage of the amount you were putting toward paying off your debt and start a couple savings accounts. One for long-term saving and one for that “reward” you so justifiably deserve….whatever that may be.

Think about the long-term repercussions of NOT lowering your debt setpoint. You can see them all around you these days. Debt-free people are weathering these financial times much better than the deeply in debt.

Don’t despair as my friend Leo Quinn has written a very practical guide that can help you reset your thinking and help you on your way to freedom from debt.

You can find out more about it on www.leoquinn.com

Here is what one of his very satisfied customer had to say :

Dear Mr. Quinn,

Immediately after I e-mailed you in February
asking whether your program could possibly
benefit someone like me: 64 yrs old, disabled,
on a fixed once-a-month income…an unexpected
family crisis occurred requiring me to travel out
of state (adding, of course, to my credit card woes).
I have just returned – this weekend – to find your
quick-as-lightening reply…

… I’ve been sitting here
staring in amazement at what is clearly a
doable solution to my debt woes!  I have, as
of this day, already paid off one bill that, doing
it the ‘old’ way (paying a little more than the
required minimum balance each month – or -
doing it the Suze Orman way of paying off
the ‘highest interest’ credit cards first!) – was
spreading myself too thin – it just wasn’t budging!

I can now confidently predict that another credit
card bill will be paid off within three months…

After  that, I’ll be able to focus on paying off the final
major credit card in 2 years or less compared
to the possible 15 or 20 years that has been
hanging over me like a toxic cloud!

Up until now I  literally became physically ill each month
at bill-paying time, but once I started reading
your program I could actually see a ‘light at the
end of the tunnel’…and it was YOU!  I have
also opened a savings account!  I can do this!

Please accept my heartfelt thanks for your
kindness, your wisdom and your uncommon
generosity!

Blessings,  Lydia
***

Follow this link to find out how you can achieve freedom from debt too.