I’m sorry… but you’ve been lied to.
Unless you’re a finance or economics major, no one ever sat you down to teach you the mechanics of money. As a result, you probably have some deep-seated beliefs about money that are not only wrong — but also destructive to your financial future.
Things like…
- “Being debt free is the ultimate goal.”
- “I like cash because it’s safe.”
- “I don’t have enough to invest right now.”
- “I can worry about retirement later.”
- “My house is the only investment I need.”
Do you know why these lies are destructive?
Listen to this week’s episode to find out…
Show Notes
- How much did it cost in Morris County, New Jersey in 1950?
- Inflation Explained by The Economist
- Master the Game: 7 Simple Steps to Financial Freedom [Book]
- The Extraordinary Power of Compound Interest (NOTE: The power of compounding can also be leveraged by investing in non-interest bearing assets)
- Which is better: lump sum investing or dollar cost averaging?
Assalaamu alaykum,
Great tips on investing!
I wanted to ask, is investing with a return produced from compound interest Islamically permissible?
I always understood that interest, whether giving or taking, is haram.
Jazak Allah Khayr
Wa alaykum assalam Imraan,
When we refer to compounding, we’re strictly referring to compounding that occurs outside of interest bearing investments (stocks, equity, precious metals, etc). More on that to come insha’Allah.
Ahmad
Assalaamu Alaykum,
I subscribed to this podcast thinking it would provide a good opportunity to learn about how to manage and invest money in an Islamic manner, that is: what to invest in, what to stay away from, etc. All of the tips, however, are geared towards an un Islamic financial system. Take the compounding example for instance. You mention next to the link that it can apply to non-interest bearing investments, but give no example of how that is possible in the actual podcast.
I would appreciate it if you can explain all of the things you mentioned from an Islamic viewpoint in future episodes. Perhaps I’m in the minority, but I think it’s disingenuous to market this towards a Muslim audience whilst giving financial advice that is not specific to Muslims who wish to adhere to Shari’a compliant investing. I understand you’re not Shayookh, but perhaps you can bring a guest onto your show who can talk about what we can and can’t do as Muslims in the modern financial system.
Wa salaam,
Ryan
Wa alaikum Assalam Ryan,
You raise a lot of important points and I want to ensure I touch on all of them.
Ahmad and I spent a lot of time debating what we would and wouldn’t be able to do on a podcast; before this all got started. Since we are speaking on the internet, there is no way for us to know who will be listening, and what their specific needs are. So unfortunately, we cannot say what a listener should be investing in. As we have mentioned in the first episode, we are not shuyookh, so we have chosen not to engage in teaching Islam, and rather leave that up to the ulemaa’.
Bringing in shuyookh is in the works, but here is the problem: Muslims follow different schools, scholars and sects. And as you know, we fight with each other about those religious differences. The main advice that we want to bring to the community is to be responsible with your money and follow your core beliefs. There is a lot of personal money management that Muslims are not aware of because we have a phobia of speaking about money. RizqWise is here to start a conversation. It is needed and universal no matter what school of thought you follow. The details about how your specific beliefs apply in your daily life is tremendously individual. If we get too detailed in telling you what you can, and cannot do, from a religious standpoint it would be easy for us to alienate people. So how do we get the message about money that is needed, without alienating the differences of opinion that exists between Muslims? It is a constant debate in RizqWise HQ.
I want to touch on the idea that we are geared towards and un-Islamic financial system. You are right. Why? Because most of our listeners live in a non-Muslim country. Any masjid on any given day, will admonish people for not being halal with their money, without telling them what they can realistically do in the non-Muslim country in which they live. So in an effort to stay away from haram, Muslims avoid the topic of money altogether. They do not build wealth because they think it is haram. Instead, they spend all their money, leaving them with nothing for the future and are worse off because of this financial taboo. I meet with older Muslims who are struggling financially, after living a life with great income and savings potential. But now they are older and are facing retirement (usually not their choice) and they’re looking to me for answers. Too often the only answer is that it is too late.
I do not want that to happen to you. I want young Muslims to engage with the topic of money early. Find a school of thought or shaykh that you agree with regarding what is halal, and what you can actually find and do. Each country is different in what financial instruments are available, and each person is different in what they accept as halal. RizqWise can’t tell you what to do, but we can get the conversation started and teach you the core money principles that will carry you through your life insha’Allah. These principles will apply regardless of your religious opinion or region.
To answer your point specifically, compounding is a mathematical concept that is widely misunderstood by Muslims and non-Muslims alike. It is usually illustrated with interest for ease of visualization, but it applies to all kinds of capital growth; including dividends and gains. The notion that it is only in unIslamic financial instruments is a perfect example of the misinformation that exists within the Muslim community. RizqWise is striving to change that. Although, it looks like Ahmad and I failed to do so in our podcast as you aren’t the only person who complained about us talking about compounding.. We will try to do better in the future insha’Allah.
At the end of the day, RizqWise can’t be your only source of financial information because of individual, religious, and regional constraints. But we strive to be the thought leaders in getting Muslims to engage in these discussions. I like that you asked the questions that you did, and I understand the frustration that we cannot give you all the answers you are seeking. Muslims need to understand the basics of money management, and that is where RizqWise is starting now. I hope you will continue to listen as we progress through our material and continue to provide us with feedback. I hope this long winded reply is evidence to how seriously we take our listener feedback.
May Allah keep us all on the straight path.