Saving and Investing Money

Learning to save and invest your money wisely is the first step in creating a solid foundation for financial success. At Financer.com we lay out the basics of saving and investing your money.

Frequently asked questions about saving and investing.

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What are the benefits to saving money?

Saving your money has a number of benefits. First, having money saved up can be used in emergency or unexpected financial burdens. This can save you from taking out a loan. Next, banks offer interest on savings accounts. While it is not very much interest, it is still some additional money. Saving money can also help you make a large purchase, such as a house or car, which often require a down payment.

Why should I invest my money?

Investing is perhaps the best way for someone to grow their money. An investment portfolio can help you grow your money for the future, especially retirement. By investing your money, you can earn a substantial amount more for the future.

What is a diversified portfolio?

Diversifying your portfolio means you have multiple, different types of investments. This can include almost anything, such as stocks, bonds, real estate, and more. By diversifying your portfolio, you limit your potential risk because if one investment goes down, you have others to prop up your portfolio. This is why it is always recommended that you diversify your portfolio.

Why is investing such a big deal for retirement?

Most companies are moving away from a pension plan. Because of this, it is up to the individual to prepare for their retirement. This can be done in the form of investment. Most employers offer a matching option for contributions to 401(k)’s, a retirement investment account. By investing now, you can ensure your money has growth and security for your future retirement life.

The Benefits of Saving and Investing Your Money

When it comes to building a safe and secure financial future, there are two things everyone needs to do in order to have a secure foundation: saving and investing your money.

When learning how to wisely handle finances, it is essential that a person knows those two skills if they are to succeed with their money.

The two terms go hand-in-hand when dealing with finances. Oftentimes, individuals’ investments are their savings and vice versa.

So let’s look at why you should familiarize yourself with saving and investing.

Saving Your Money

Everyone has probably been told that saving money is important. It is the number one suggested way to make yourself financially secure. However, the question of why you should save money is something everyone should answer when budgeting.

People often take saving money for granted, even though it is important to look at the reasons.

Emergency Expenses – Unexpected Needs For Money

Save and InvestPerhaps the first reason that comes to mind is emergency funds. You can never fully predict the future, and so keeping money that can be used for those surprises can be the difference of having a slimmer budget rather than going into debt.

Losing your job, having emergency expenses, or a surprise event can all be factors that can truly financially devastate someone.

Saved money and proper insurance is essential for preparing yourself for the unexpected and can keep you from losing your possessions and financial independence.

Large Purchase

The next reason for saving money is for future use on large expenses. Very few people have the option of buying a car or house with just the money they earn in a month. This is where savings play a more active role in someone’s finances.

Most large purchases require a down payment, and if you are to meet that requirement, chances are you will need to save some money away. By doing this, you not only work towards a goal in mind but you can get into the habit of storing money away for the unknown future.

Peace of Mind

 

While savings are a logical choice for those looking to be financially healthy, the peace of mind knowing you have money for any reason you might need is fulfilling emotionally.

Everyone likes knowing they are safe, so with some money saved away, you don’t have to constantly worry about any of the reasons above.

How to Save

So now that the reasons for saving money have been established, the question of how to save money arises. Fortunately, there are some simple and straightforward suggestions that most people can follow for saving money.

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The most frequently suggested rule is called “20/30/50 rule”, with 20% of income going towards savings and debt, 30% of income used to pay for your living expenses, and 50% being used for all other expenses.

While all of the ratios are important to a well-rounded budget, we are going to focus on the 20% aspect of the rule. This rule is very useful for those who are first setting up a budget or learning how to handle their money.

Saving money can be complicated for anyone and individual circumstances apply. Taking that into account, it is highly beneficial to save 20% of your income every month if you are able to. This will allow for consistency and a standardized budget.

Although 20% of income savings is the recommended standard, it is not always possible for everyone. In those cases, try to use smaller ways that can add up on savings.

This could include putting your extra change into a jar every day after getting home. You can also cut extra expenses like going out to eat or buying entertainment items.

Let’s look at investing money next.

Investing Money

While saving your money is certainly a safe money move, it is not the best way to grow your money. With extremely low interest rates and an economy that seems to be bustling, the best option for anyone looking for financial growth is investing money.

So why should you invest money?

Investing money is a broad term that can really be applied to anything. There are investments ranging from stocks and bonds to investing in real estate, to investments in commodities. The list goes on and on. But for what reason would someone want to invest? Well, here are a few key reasons as to why anyone would look into investing money.

Monetary Growth

As stated before, interest rates are currently low, very low. Some of the highest savings accounts are below 2%. Therefore, if you don’t want your money to slowly be eroded away by inflation, you need to invest.

By investing your money wisely, you’re not just keeping your money above inflation, but you can also gain significant income from choice investments that can easily supplement your needs and wants above your usual monthly income.

Retirement

With Social Security slowly dying and pension plans virtually nonexistent, investing is the best way to go for those looking to have a good retirement. With options such as 401(k), those investing money into their retirement can benefit immensely.

Not only is it commonplace for an employer to match retirement contributions up to a certain point, but income put towards 401(k) can be pre-tax income. This is a win-win for anyone looking for a comfy retirement future.

Learn More About the Economy

Turning on the news and hearing all the jargon related to the economy and investing can seem intimidating. This is where investing isn’t just beneficial to your money, but to your knowledge as well.

As you continue to invest and research where you want your money to go, your knowledge of how the market works will increase. This is a great plus to anyone who wants to know more about how the economy is working and what our country’s financial status is.

Saving and investing your money is the keys to a wealthy success. Learning how to wisely manage your money in those two fields will greatly increase your monetary well-being and future financial status.

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