We set up our budget, we find ways and areas to reduce our expenses, we get our spending under control, we live below our means, we find ways to increase our income, we get our debt snowball rolling, we learn to pay ourselves first to save for our emergency fund and of course…save to invest! The point of paying ourselves first in order to save is not just to hoard our money or stuff it under a mattress, but rather to use that money as a tool and put it to work for us for our long-term future goals. Our emergency funds are separate from our investing funds. Our emergency funds serve us in our short to mid-term future when faced with unexpected expenses, so having those funds in low yielding, liquid accounts is fine since the real return on those investments is peace of mind. But money saved beyond our emergency funds…that money needs to be used for investing!
What is Your Purpose for Saving Money?
Investing money is something many people shy away from for various reasons, one being that it can be overwhelming. Investing can be as simple or as complicated as you want it to be, the point is that your money needs to be utilized in a way that will allow it to grow and produce yields faster than inflation. Inflation is the reduced value of the dollar over time, so as the cost of living and prices rise, our money buys us less. Now that’s a lousy deal and unfortunately, it’s what we’re up against. There are many different ways and strategies when it comes to investing and it all depends on your goals, your risk tolerance and how hands on or passive you want to be in your investing. There are varying strategies in which to invest from more aggressive to less aggressive, with even the most passive, less aggressive strategies still having a certain degree of risk.
The most common and simplest strategy for investing for your long-term goals is an employer sponsored 401k or an equivalent type of investment vehicle for those that are self-employed. As an employee, that type of strategy is the simplest to set up and easiest to stick to with when given the ability of having funds automatically deducted right from your pay checks before you even see them. For the self-employed, it will take a little more discipline to make sure those funds make it that account. That type of strategy is more of a passive, hands off approach to investing which is the very least you should be doing. Then you have the more hands on approach, for example, of trading stocks and/or bonds for yourself, managing your own funds, investing in real estate, etc. Of course, the more aggressive your strategy, the more risk you assume, but it also gives you the ability to out-pace the inflation game much faster.
“Investing puts money to work. The only reason to save money is to invest it.” – Grant Cardone
Whichever strategy…or strategies you decide to utilize, will depend on your comfort level of risk and effort (how hands on you care to be). The differences vary from high risk to low risk and from very hands on to very passive. The most important thing in all of this is getting the information and/or help you need to educate yourself enough to make the best decision based on your own individual goals and desires. There is no silver bullet or one size fits all approach to investing. The path or vehicle(s) you choose to grow your money should be completely based on you!
The concept of Financeology is that there is not one style, strategy, concept, technique or “way” of doing things when it comes to achieving your financial goals! It comes down to who you are as an individual, what your goals are, what your comfort levels are, what your risk tolerances are, as to how you approach your financial future. Ultimately, you’re the only one to decide how to invest your money. The only way to figure that out is to be curious, seek out professional advice, ask questions, read, study, learn and take action. As you become more comfortable in whatever strategy you start with, you may find your comfort zone expanding and you’ll find new strategies as you grow. Just start, the rest will follow. Your financial future is counting on you!
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