Time and money are precious resources to everyone due to the fact that they are limited. Every single person has limited supply of money and time, but high demand of them. For example, a person wants to own this and buy that. A person wants to learn a new language, learn to play instrument, create a business, travel, have time with friends and family, etc. But he only has so much time and money during his lifetime. He cannot possibly owns everything and do everything. Limited resources = precious resources due to the law of supply and demand. Things that have low supply but high demand will command high value and vice versa.Â
Every human being has resources that are limited. It is up to him how he spends and allocates his limited resources (especially, time and money) that makes the difference. If he invests his resources wisely, he will increase his resources making his life easier.
I can only hope that there is an easy way to turn finite resources to become infinite resources. I think the only way I can achieve that is throughÂ compounding machine.
You put money into the compounding machine and you get more money out. By repeating this process, you can generate as much money as possible. Therefore, instead of spending money on things that you don’t need, you accumulate or save your asset by allocating your money to the compounding machine.
Similarly, in order to have more time, you choose only the activities that matter to you and focus on them. YouÂ spend time on acquiring new knowledge to increase your productivity for those activities. You repeat the process and things will get more and more easy and save you time in the end. Therefore, instead of spending time on minor things, you invest your time on things that matter to you.
This is the way to turn your limited resources for better uses. Things will get better and better the more money and time you put into the compounding machine. It grows your resources.
Activities that have compounding effect:
- investing with dividend reinvested
- reading within your skill level
Note: The reason I choose time and money as examples of limited resources is because they both are components of the famous compound interest formula. They are the magic components to make the compounding effect to work.
How to maximize the use of your limited resource: Money
Buying stocks is like buying hamburgers
Let say your life depends on hamburger and your only need to survive is to buy hamburger. But you only have a limited amount of money. Consider the following cases:
a) the price of hamburger goes up every year.
b) the price of hamburger goes down every year.
For which case will you have a better use of your money? You can afford less hamburgers for case a) than for case b) over the years. Assuming the size and the quality of the burgers remain the same, which case would you prefer?
Now come the final exam. In stock market, which case would you prefer:
a) the price of the stock is getting cheaper or remains stagnant for years.
b) the price of the stock goes up every year.
In order to maximize the use of your money, you buy the most with the least money. In other words, you buy good things that are priced cheaply. Same goes to the usage of time, you achieve the most with the least time. You do simple (relative to your skill) things that have high value. That is how you put your precious resources for a better use.