Saving and investing means different things to different people, depending on your life situation and lifestyle.
Even if you’re not a fencer for Excel spreadsheets or a person who gets cakes from savings courses, saving and investing can be made unique.
First, you should look at your own life and determine your current financial situation. When taking over money, it is important to be honest, realistic and not compare yourself to others.
If the guys are already saving for your next vacation trip or your own apartment, and you’re paying back the teen quick tips yourself, good for you !! Be proud to take responsibility and take over your finances. Don’t let other people’s life situations obscure or diminish your own goals, but focus on what’s a priority in your life right now.
If, on the other hand, you are unsure of what would be the first step in taking over your finances, keep reading this post! I have collected less than saving and investment in three stages. Try to identify what stage you are at and take it from there!
1.Fill your well before piling
If you have consumer credit, costly installment agreements, a credit card loan, or other high-interest debt, pay them all off before you save for anything else. The faster you repay the loan, the less expenses and interest you pay.
It’s also important to be a good type, so you should definitely pay off your debts to friends before you put yourself aside.
The rule of thumb between debt repayment and investment goes something like this:
Check the expected return on your investment and compare it to the interest rate on your loan. If the interest rate on the loan is higher than the expected return on your investment, repay the loan first. The same money works more efficiently in loan repayment.
On the other hand, if the interest rate on the loan is lower than the expected return on your investment, you can shorten the loan in peace and invest in the stock market at the same time. This is often the case, for example, with student and mortgage loans. Then the money will work more efficiently in the stock market, and the end result will be more money for you.
2.Increase the buffer for a bad and good day
Once the acute loans have been repaid off, an increase in the buffer may be considered. A buffer is a amount of money you keep aside in case of an unexpected pass or event
This can be a sudden termination of employment, a sudden move, the end of a relationship, or any other thing that worsens the financial situation. Buffer will keep you afloat while you get your life back on track.
Note! This surprising event can also be something wonderful, like seizing a special opportunity, starting a business, writing a book, or even moving abroad.
Buffer is, in fact, called the Fuck you -fund, which makes sure that you do not have to stay in an employment relationship, partnership or home country just for the sake of financial security. Thanks to the Fuck you fund you can independently decide on your life.
The buffer is generally said to be a good size when it covers 3-6 months of spending.
3.Put money to work for you
Once the everyday life rolls and all the necessary expenses are covered, you can start investing. When you invest in the stock market, your goal is to get capital to grow. Long-term investment in the stock exchange will bear fruit, as stock prices will rise in the long run. The returns on your stock investment increase in interest rates and companies pay dividends to their owners
The return on capital is the salary of the investor, the compensation for having invested your money in the business of the company. The longer the investment horizon is located, the more time your investment will have time to increase interest rates (more on this later).
The dividend, on the other hand, is the share of profits distributed by companies to their owners. The dividend is usually paid once a year. Dividends are usually distributed by large and stable companies. Smaller and growth-oriented companies tend to use the profit margin to grow their business, which in turn shows investors as an increase in share value.
You can invest in shares directly or through an equity fund. Equity funds invest in many stocks, in which case the risk is diversified.
Which of these three stages are you in? What is your next (or first) step in saving and investing? You will be happy to share your answers in the comments field.
In fact, I sailed between these three steps to start investing.
A wonderful weekend for all of you!