This is an issue that comes to my mind each time I have a few extra cash at hand. I have invested so much money that never yielded any profit, neither did I get my capital back. Since then, I’ve been thinking along the line of saving whatever comes into my hands. saving your money in an economy that is as bad as what we are experiencing here in my country, would not be a very good idea. Our local currency keeps depreciating every day. Saving your money in such an economy makes you loose the actual value of the money.
I have been thinking about what to do with my current earnings, so I went online to search for a solution to this issue. Here are some of the findings I made, and I hope it helps other people who might be facing similar challenges. This guide will give brief answers to the following questions.
What is saving?
Why we should save.
How much should I save?
What is investing?
How do I invest wisely?
What is saving?
“Saving is income not spent or deferred consumption. Methods of saving include putting money aside in, for example, a deposit account, a pension account, an investment fund, or as cash.[1] Saving also involves reducing expenditures, such as recurring costs. In terms of personal finance, saving generally specifies low-risk preservation of money, as in a deposit account, versus investment, wherein risk is a lot higher; in economics more broadly, it refers to any income not used for immediate consumption.”
https://en.wikipedia.org/wiki/Saving.
Saving means putting money aside, bit by bit.
Why we should save
If you do want financial freedom, then it is very important to save your money often. Here are some reasons why it is important to save.
Emergencies such as:
Sudden medical expenses. Sudden loss of a job or other means of income. Sudden opportunities might be available only to the person who has available cash. Etc.
Retirement
A time will come when you can no longer work for money. At that time, you will have to rely on your savings and investments to take care of your expenses.
For Investments
you’ll have to save up money before you can make huge investments. Except you inherited a huge amount of money or wealth.
How much should I save?
This is a very tough one, especially for those whose income can hardly take care of their basic needs. Yet, if we are determined to save a little part of our money, we can do that. Imagine it this way, if that income was less than that, you’ll still find a way to manage it. So you could assume you are earning 20% less than the actual income, then save that 20%. Living within your means will help you save. When saving turns to a habit, it becomes easier to save.
Some tips to help you save money:
- Use a budget planner to get a clear picture of how you spend your money
- Save unexpected money.
- Cut down on some expenses.
- Compare prices of things you want before purchasing them. You might still get nice quality brands with cheaper prices. Shop around before making your purchases.
- Break the habit of spending unnecessarily.
- Save at least 20% of your income should go into savings.
What is investing?
To invest is to allocate money (or sometimes another resource, such as time) in the expectation of some benefit in the future.
https://en.wikipedia.org/wiki/Investment
Investing means to put forth an amount of something with the expectation that it will generate a return in the future. You will hear people talk about investing their time or effort, and of course, money. When you invest your money, it means that instead of spending it you are putting it in some sort of vehicle that will use it to make more money. And that’s why investing is important: investments often involve lots of risk. So it is important to invest wisely.
http://www.moneyaftergraduation.com/2013/11/20/why-is-investing-important/
It is important to note that, we have both long term and short term investments. And the both of them have their good sides.
How do I invest wisely?
Never invest in things you do not understand.
Don’t invest in Ponzi schemes. Except you want to gamble with your money.
Get counsels from professionals before investing.
Whenever you want to invest, keep your emotions out of it.
Always think long term when investing
Don’t invest with all your money.
One of the greatest benefits of investing is that your money starts working for you and not the other way round.
Conclusion
Both saving and investing are very important for our financial freedom. Making a wise decision on both of them will help you live a more financially free life.
With the rise of the cryptocurrencies, investing in some of those coins would be a wise decision. Personally, I’ll go for Steem, Ethereum, and Bitshares.
I’ll end with this popular quote.
"Money isn't everything, but happiness alone can't keep out the rain."
All images were collected from imgur.com
Thanks for Reading
