Most new investors don’t know that saving money and investing money are entirely different. Saving money ensures that it is usually available when we need it and that it has a low value-loss risk. You can save to build up an emergency fund, a rainy day fund, for your retirement, to go on a vacation, to buy a car or a house, etc. When we talk about investing, the first thing that comes to mind is money but, you can also invest time and effort. Investing usually has a long-term horizon and involves providing something with the expectation of obtaining a profit from it. You can invest time in learning a skill which will then generate you an extra income, you can invest in your financial education so you can afterward invest in the stock market or in real estate to begin making some serious money and begin your path to get out of the rat race. Before beginning your journey to build wealth and achieve financial freedom, you must know these fundamental concepts because it can save you from much stress.
Saving
Saving money typically ensures that when it is needed, it is available to use it right away. For example, if you want to save for your annual family vacation, you might like to set aside $3,000 in savings at the end of the year in nine months. You then know how much you need to save on a monthly basis and the ability to spend the money without any charge on that precious holiday.
You can also save to deal with an urgent auto repair, an appendectomy in an emergency or sudden work loss. If the economy continues to slow down and you are at risk of losing your job, you should be fortunate if you have saved a great deal of money in your emergency fund to get through while you find a new job. If you are a mom, it is wise to put some money away as quickly as you can for your child’s college fund. By the year, university education is getting more expensive. Saving for a college fund will minimize the need to take out a costly student loan to pay tuition fees for your son or daughter. When they finish college without having to pay student loans, you’ll give them the best chance to raise money to buy their own house when the time is right.
Many of us won’t save enough to purchase a house straight away; therefore, you’re going to require a mortgage. In many cases, with a large deposit or down payment, better mortgage deals can be obtained. Such offers may include cash back incentives or reduced interest rates from your mortgage provider. These are available because your lower value loan often means that you are at a lower risk of lending money. Don’t wait to save. Time is your best ally when it comes to saving money and achieving your financial objectives. You can start by saving relatively a small amount of money but, with time, it will accumulate and make a difference in the future ensuring that you meet all your financial goals.
Investing
Many people say that investing is too risky. Risk comes from ignorance; therefore, if you want to reduce risk, you have to know in what you are investing in. For example, if you want to invest in real estate, I strongly advise you that you first invest some time in studying the subject to avoid making rookie mistakes. This applies to any type of investment. One strategy often used by some investors is to diversify to reduce risk. There is a famous phrase which says “don’t put all the eggs in one basket”. Diversification won’t protect you from an economic crisis. An upcoming strategy is to control and focus your money to generate cash flow. This means that the best investments do not depend on the economy. To make this clear I will give you an example. Imagine that you invest in real estate and you get several checks every month while a friend of yours invests in the stock market hoping that the value of his stock will go up so he can see a profit, no monthly check received. One day, the economy collapses and the value of his stocks drops to the ground while you are still receiving your juicy checks every month. That’s the real deal!
The number one regret of investors is that they didn’t start sooner. Even if you feel you are too young to begin investing do not underestimate your abilities. These days, we have all the information we want within the reach of a simple click. Educate yourself and begin gaining experience as soon as you can because time is your ally. Remember, a plan without action means nothing. So, if you really are committed to exiting the rat race, start learning and gaining experience to reach your personal and financial goals.
