The foundation of financial success isn’t earning more money, but saving it. Having a good amount of money saved or invested gives you the advantage of living a comfortable life without having to work extra hard. Whether you start a new side-business or purchase shares of stock when the market has crashed, you’ll never regret saving and investing your money, only to use it later. Some of the most common questions that beginners find themselves asking are “What’s the difference between saving and investing?”, “How much do I save?”, and “When should I start saving?”
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In this article we’ll be addressing these questions and helping you out to save for a better future.
Saving versus investing: The first thing that beginners need to know is that there is a huge difference in saving and investing. Both have their place in our lives and play equally important but separate roles. How you handle your savings vs. your investments can have a huge impact on your financial success, stress level, and over all wealth. It can mean the difference between suffering a recession with anxiety and sleeping soundly knowing you have enough liquid cash to spare.
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When should you start saving and/or investing: If you think you have enough money in your bank account to cover you for more than 6 months, it’s time to start investing some of it and saving the rest of it. You must consider your current lifestyle choice and the elasticity of your income. There is no point in investing money if you aren’t willing to take risks. But the smarter way to financial success is taking smarter risks rather than larger ones. So, in conclusion, the right savings or investments for you will depend on how comfortable you are at taking risks, and also on your current finances and future goals.
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How much should you save: So now that you know you are comfortable with taking a few risks and saving money for a successful future; the biggest question that arises at this point in time is ‘how much to save’. There is a general belief in the middle class society that the more you money you have the better. This makes them stash away more cash than is actually required. You must realize that although saving money is important, giving up on your current lifestyle and comforts is a strict no-no. You must first calculate how much money you need to smoothly sail through the month; once you decide upon an amount, withdraw it and save the rest. Another common mistake that beginners tend to make while saving and investing is that of comparing themselves to their friends and counterparts. You must realise that the amount of money you need to save in the event of a disaster could be very different from your friends, family, and neighbours.
Lastly, it’s best to seek help from a professional financial advisor as he can help give you a starting point to gauge whether your expectations regarding savings and investments are reasonable.