One of the main goals of budgeting is basically to get some extra cash that you will not spend in the course of the month.
The main reason you may be saving this cash is perhaps to spend it on something huge without necessarily going broke or getting into serious debt for common things like television or furniture. Therefore it is imperative to put your accumulated cash into a savings account. Although savings account does not accumulate any interest, it is still the best place to store your money if you have a goal.
On the other hand, investing is the same as making money grow somewhere else at a very high rate than putting it into a savings account.
The main essence of investing is basically saving cash for the future. The best thing about investing is that it has high monetary returns.
There are a few things that you need to note or consider before you invest.
The best use for your money
The perfect time to invest is actually the most important factor that you really need to consider- looking at the best use for the money that you have.
For instance does it make sense to pay all your debt? Note that the amount of money that you spend on the interest of the credit card debt might consequently be higher than your returns when you invest your money.
Another important detail to note is that you should always protect yourself from financial problems that could deteriorate all your investments. Or even worse. You can simply do this by purchasing insurance before you invest.
First of all you need to be sure that you have proper health insurance. This will protect your cash against high cost associated with hospitals and health problems.
Create a money cushion of up to approximately six months expenses or even wages or salary in case unemployment arises. It is crucial to put your money in a gadget that can easily convert into liquid cash- you won’t be putting your cash at risk. Like for instance savings account interest.
Your objective for investing
This is yet another important factor to put in mind. Everyone who invests hopes to grow their money fast. Most people do not even care to risk because they think it is easy to recover.
Below are various goals that are compatible with various types of investments or rather a hootch-porch of investments;
Keep your cash extremely safe because you will need it soon.
If you are about to retire you would not like to see your money disappear or decrease in value the instant you are about to retire.
Therefore it is important to determine whether your goals are short term or long term- this will help you decide whether to invest on less risky assets or not.
- Taking moderate risk with your cash for good appreciation. This is a very important factor that should not be left out.
- Taking aggressive risks for higher returns. If you are ready to take any risk with your cash for higher returns, then your goal should be growth.
- Invest your money in stocks of different companies that will offer high returns in the future. This is the perfect idea especially if you can maintain your investment for a long time. This is so because some companies may take ages.
Your age will determine where you will invest your money and the amount of to invest. There is a very big advantage when investing when you are young because you have all the time and patience to wait for your investments to realize returns.
Another thing is that you are more secure when young because you do not have a lot to think about. It is also easy to recover from mistakes made.
Time before you need the money
People do not invest just to retire, there are a number of investments that possess short term goals. Therefore it is important to know where to invest (a very essential factor to note). Take your time to do research and study on potential companies.
Did you know that the higher you are ready to take a risk the more you are most likely to get higher returns? Although not everyone is at the liberty to take such risk, it is always advisable to try the impossible.