How to Save and Invest Wisely

How to Save and Invest Wisely

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Last Updated on January 20, 2024 by Work In My Pajamas

As soon as you have a steady stream of income that covers your needs, you should start thinking about investing or saving a part of it. The preferable option is to do both but in a way that allows you to create a hedge for your financial future and to expand your plans as years go by.

Saving and investing aren’t that different from each other because they both depend on using the resources you have to plan for the future, which you predict based on the information at your disposal. However, one requires a more aggressive approach than the other.

How Much to Save

The first question everyone asks themselves is how much they should save each month. It’s a reasonable question, but it’s hardly the most important one. The important thing is to always put some money aside, especially for a young person, and it will add up over time.

The unwritten rule says that it’s best to automatically transfer at least 10 percent of your salary to the savings account. There’s no reason to actually stick with this number but it can be a useful goalpost.

Keep Track of Your Spending

One of the best ways to get a clear image of how much you can save and invest is to spend some time tracking all of your income and all of your expenses and thus compile the data needed to make further business decisions.

It’s important to be diligent in this regard and to make a note of every single purchase you make. This is much easier when you’re paying for most of your purchases digitally. It saves you from having to make lists and that way you won’t forget any of the smaller purchases that add up.

Hedge Investments

Every investment is a risk on its own because you can never know which one will make a profit and which one won’t. That’s why it’s a good idea to have a couple of safe investments to hedge your bets. For instance, the gold price is pretty constant and purchasing gold can provide you with smaller but safe returns.

Gold is also always needed in some industries, which means you can always sell it in case you need some extra cash fast. It’s easy to transport and move and it will remain so regardless of the changes in the market.

Real Estate Properties

There are two main ways how investing yields returns. There are those investments in which you make quick profits right away and those that yield small returns over a long time. Investing in property is a good idea precisely because it can be both at the same time.

Real estate can be bought, fixed up and sold for a profit – thus making you a quick profit, or you could rent it and you could be earning for years from one carefully chosen property.  Have in mind that the second option also requires additional expenses in terms of management.

How to Create a Balance?

It might prove to be difficult to strike a balance between putting some of your income into savings account and using them proactively by investing. The decision depends on how much you make and how old you are, but it’s also about your instincts and personal preference.

Many hesitate to go into investing, but if your loans are paid off, and if you have an emergency fund set up, it might be a good time to use at least a portion of your money in ways that will help you make passive income.

When it comes to saving and investing, you need to be honest with assessing your abilities and to make sure you know where you see yourself in at least five years both personally and financially.

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