How to Save and Invest
It may seem like saving and investing are two opposite financial interactions. One is putting money aside in order to mitigate future risks in your financial endeavors. The second one is embracing the risks and using your funds to start a potentially lucrative project.
However, the two are more similar than it seems. For instance, they both depend on how well you can manage your money on a monthly basis. Also, both are very much related to your ability to plan for the future and to take advantage of your ability to predict events.
Before you’re able to invest or make long-term plans for your retirement, you need to build up small savings that shouldn’t have any particular purpose. Those are savings that you can tap into in case something happens with your regular income or in case there’s some large expense you haven’t planned for.
The optimal plan for this general savings is to cover 6 monthly salaries. When you have that much, you can start thinking about what do to with rest of the money while knowing you’re safe and covered in case something bad happens.
How to make saving easier
At this point, most people don’t have almost any savings put aside. That’s not because they don’t have enough money to put aside. The main thing holding them back is their inability to organize their day-to-day expenses and to plan ahead.
There are ways to mitigate this. Start by keeping track of your expenses and plan based on the patterns that emerge from this tracking. It’s also useful to try and automate most of your payments including your savings and thus get them done without your involvement.
It’s important to consider how the savings will affect your taxes. Some of your savings can be deducted from the yearly taxes while others aren’t eligible. This depends on the type of savings you’re using and the amount, but it’s best to consult a professional to make sure that you’re getting a fair deal.
There’s also an option of using specialized savings accounts that are used for saving for college or buying a property. There are different tax rules in regards to these. They can even be tax -free in some cases and they are also most commonly used by an average household.
There are no investments that are entirely safe, but there are things you can do in order to mitigate the risks and create a hedge. These investments are those that don’t react to market changes in the way most of the others do. They have a smaller return rate, but they are usually bringing a constant stream of profit.
One of the ways of doing this is to purchase platinum bar that’s easily moved and stored. These bars can also be sold and bought rather quickly in case you need a cash injection because they are needed for jewelry and in the tech industry.
The most common investment an average homeowner makes is buying property. There are reasons this is the case. First of all, it’s an investment that you can use and pass on to the next generation. There are also numerous tax cuts and governmental help for this industry.
It can also be a source of income on a monthly basis. There are always those looking to rent both apartments and offices and even though this can be tedious, it’s an easy way to earn extra cash, and sometimes you don’t even need professionals to manage the property.
Stocks are also a common investment because they don’t require you to know that much about the investment you’re making and brokers can help you out for a reasonable fee. If you diversify your investments, you can profit even if some of your endeavors fail.
It’s important to always have in mind that when you’re trading in stocks, you’re in fact buying a percentage of a company and its future income. So it helps to learn about the company and the industry behind and not just about return rates and your potential profit.
In the end, the main question remains that of how to balance between saving for rainy days and using your funds productively and turning them into profit. Both are possible at once, but it requires having your priorities straight and planning in advance.
It largely depends on where you and your family are in terms of long-term financial goals. Young people should focus more on saving, establishing credit and paying off debt. When you reach personal and financial maturity, you should turn your attention to investing and planting the seeds for the future.
Try to save in ways that allow you to be comfortable while safe, and to invest in projects with small but steady returns.
Apart from these, if you know more tricks on how to save money !!! Please share with us .