“Investing puts money to work. The only reason to save money is to invest it.” – Grant Cardone
When you set up your budget, you find ways and areas to reduce your expenses. You get your spending under control, you live below your means, you find ways to increase your income, you get your debt snowball rolling, you learn to pay yourself first to save for your emergency fund and of course…you also need to save to invest! That’s where the “magic” happens.
The point of paying yourself first in order to save is not just to hoard your money or stuff it under a mattress. It’s to use that money as a tool and put it to work for your long-term future goals. It’s actually a multi-pronged approach. Each of your different savings’ funds are separate from one another. Your emergency funds are separate from your investing funds and any other funds you put money aside for. But they all start from paying yourself first.
Should You Save to Invest
Your emergency funds serve you in your 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. Once you’ve saved money beyond your emergency funds…that money needs to be used for investing! Investing your money is when wealth creation starts to take place.
Financial independence is when your source of income doesn’t come from a days-work for a days-pay. Saving money to invest is the first step to putting your money to work for you. Which is the essence of building wealth. You can only achieve true financial independence through investing, so don’t just save, save to invest!
“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” – Paul Samuelson
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. As the cost of living and prices rise, our money buys us less.
Now that’s a lousy deal, but unfortunately, it’s what we’re up against. There are many different ways and strategies when it comes to investing. 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. 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. Because it gives you 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 into 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.
“In investing, what is comfortable is rarely profitable.” – Robert Arnott
There are so many different investment strategies out there that choosing the right one really comes down to deciding which type would fit you best. 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 and 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, and the rest will follow. Your financial future is counting on you!
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