Money Users & Providers – The Money Cycle

Well, This is the another Basic Article of Financial Literacy. This is not about getting rich quick or something like that. But this article is about the Money Cycle means how money circulates in the economy & grows?

Basically there are 2 types of people

- Money Users (Governments & Companies (Businesses)) &

- Money Providers (Investors)

To Become Rich & Financially Free you have to understand this money cycle.

Money Providers are the Investors like you, me & the Wealthy Individuals. People (All Ultra-rich, Rich, Middle Class & Poor) Invest their money in Government &/or Company Debts & Equities (ownerships) and hope for growing it. There are wide variety of Financial products by which you invest your money and provide it to the money Users. Such as Stocks, Bonds, Mutual Funds, Investment Funds, Private Equity, Venture Capital Funds and many more………

Money Users are the Government & Companies which take money from the Investors & Invest it in Business Infrastructure, Buying Assets, Growing Business & highring talented people (Human Resource). Companies take money from Investors either from Equity route or from Debt Route.

In Equity Route, The Company sells its ownership (Shares) to the large number of public. So buying a stock means you have invested your money in that business and buy a part of that Business. Say for Example, if you buy 100 Shares of Reliance Industries than it means that you have invested that money in Reliance and in exchange of money you have buy that much portion of that Business.

Now the price of the stock moves ups and downs with the underlying value of Assets & Infrastructure of the Company. The Company will Invest your money in its Business on behalf of you and whenever it will make a profit, it will share that profit with you.

In Debt Route, The Company or the Government will issue a Debt Certificate known as Government or Corporate Bonds. So whenever you invest your money in Bonds, it means that the Company/Government is borrowing money from you and after that the Government/Company will invest it in building Infrastructure.

In Case of Government, The Government will take a Debt from you by issuing Bonds & it will invest your money in developing the Country Infrastructure. The main Income source of the Government is Tax. So The Government will collect the Tax from its citizens and will give it back to its lenders (Bond Holders) with interest.

In Case of Company, The Company will use the borrowed money to grow and expand its Business & will give you interest from its profits.

So in Short, if you want to be Rich & Financially Free than you should be either Money Provider or Money User.

You should be either Investor (Debt or Equity) or you should be Money user. If you never Invest nor use the Money than you can never be Financially Free……….

Most of the people around this world are poor and financially struggling because they neither uses nor provides their money…………!!!!!!!!!!