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posted on:
5/27/2012 4:23:33 PM EST
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Save first - Invest later!
money, invest, retire, make money, income, second income, marketing
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Saving money or "the saving habit" as Napoleon Hill put it so many years ago, is the foundation of all financial success, including investing. Having money saved is what provides the means for you to take advantage of situations, whether it's going back to college, starting a new business, or buying shares of stock when the market crashes. The resources created by saving money will provide a foundation and answer questions such as, "How much money should I be saving?" and "What is the difference between saving and investing?". You'll also learn the best places to save things like down payment money on a house.
Did you know there is a huge difference between saving money and investing? Unless you were fortunate enough to be the child of a wealthy banker or investor, it's unlikely anyone ever taught you this. Both saving money and investing have their place in your life. How you handle your savings vs. your investments can have big implications for your financial success, stress level, and how wealthy you ultimately become.
Saving always comes first. Think of it as the foundation upon which your financial house is built. The reason is simple - unless you inherit a large amount of money, it is your savings that will provide you with the capital to feed your investments.
There are two primary types of savings programs you should include in your life. They are:
•Your savings should be sufficient to cover all of your personal expenses, including your mortgage, loan payments, insurance costs, utility bills, food, and clothing expenses for at least six months. By saving you're manifesting peace of mind in future. Often life happens and we must adjust to change - ex. You lose your job, you’ll be able to have sufficient time to adjust your life without the extreme pressure that comes from living paycheck to paycheck.
•Any specific purpose in your life that will require a large amount of cash in five years or less should be savings-driven, not investment-driven. The stock market in the short-run can be extremely volatile, losing more than 50% of its value in a single year.
Only after that these things are in place, and you have health insurance. The only possible exception is putting money into a 401K plan at work if your company matches your contributions. That’s because not only will you get a substantial tax break for putting money into your retirement account, but the matching funds basically represent free cash that is being handed to you on a silver tray.
It may seem daunting now, but every successful self-made person had to begin by earning money, spending less than they earned, taking those savings, and putting them to work in projects that threw off dividends, interest, and rental income. They are no better than you are. If you learn the same thing, and can act as rationally so as to manage your money with discipline, you can enjoy the rewards of success, just as they did. In the end, saving money comes down to simple math. It really is as fundamental as 2+2=4.
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 | | Working on it! This is the type of information that needs to be shared, going to twitter. |
| | |  | | Great share Grady - given how important these principals are with respect to our lives it is amazing that they do not get taught as "core subjects" in school |
| | |  | | Thanks Grady.
These are really helpful observations. It strikes me that, in THIS economy, encouragement for building a habit of saving is CRITICAL. If we establish small goals - e.g., 2% of our earnings (i.e., each time we get a check) - we might be able to create small successes that can lead us to the targets you've identified. I'll hold onto this idea, and focus on it for my next quarter. Thanks again!
Shakira A. Ali |
| | |  | | Thanks for sharing this with us |
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