When you start the journey of your financial education, it becomes apparent that money isn’t something you should just lock away in a safe. When you have created an emergency fund that is sufficient to provide you with at least six months of your expenses, you can start thinking about putting your money to work. After all, you don’t want inflation to eat away all of your hard-earned cash?
To put it simply, if you don’t make your money work for you, you will always work for money. If it’s not a particular dream of yours to waste away for various salaries on all kinds of jobs, just to make a living, your future is real, whether you plan it or not. But a person without a plan is like a ship leaving the port without a set destination in mind. At best, you will end up a derelict on a deserted island. You don’t want your bank account to look like that, do you?
Actually Saving Money
There are many financial guidelines such as putting off ten, twenty, thirty, or even a bigger percentage of your income to secure monetary well-being in the future. We can’t tell you exactly how much you should allocate to savings on a monthly basis, as it will depend on your personal circumstances. However, ten percent is a good baseline, and most can afford it. If you can, start here. Aim higher.
If you just save money, you will be in a better situation than most other people who don’t do that at all. That’s good. If you have been around for a while, you know that money depreciates over time. Big time. That’s called inflation. In essence, it means that for each dollar you have right now, you will have less buying power in the future. Just in case you are a centenarian living in the States, you may have noticed that a bottle of coca-cola was priced exactly a nickel (5 cents) in the 1920s. Now, a single can goes for about 1.5$ dollars each. Catching the difference?
Thus, if you had a million a hundred years ago, and right now, what you could buy is drastically different. It’s still a million, but the difference is paramount. There was just one billionaire on the planet in 1916, John Rockefeller. To make things clear, the magnate was worth 3% of the US total GDP at the time. Now, there are more than 2,700 billionaires around the world. And that number is steadily increasing.
Investing In Valuable Assets
When you have been saving properly for a while, you may find yourself in a position holding a good amount of green notes sitting in your safe. Or, in a more realistic scenario, see the numbers build up in your online banking. As the inflation rate is always higher than the savings percentage in a deposit account, that’s not an option at all.
If you are doing all the hard work to invest properly, you might as well learn how to achieve a good return on your investment. To do that, you have many options. There is the stock market, that is now accessible to everyone thanks to a variety of brokers at your disposal. You don’t need thousands of dollars to invest, you can start with as little as a hundred dollars a month. Anything is better than nothing, however, if you have been doing the saving part properly, you should be able to invest a good part of your pay.
However, it’s a bit more sophisticated than finding a broker and investing in whatever he may offer you. You have to do sufficient research, understand the market, and create an investor’s profile that suits your preference. With the stock market, you need guidance, and you also have to be your own mentor. The Japanese are known for creating some of the world’s best hedge funds that you can learn at kurashinofinance.com.
The saying “don’t put all of your eggs in one basket” applies in investing as well. Generally speaking, you should have a diverse portfolio that covers multiple scenarios. It is wise to be prepared in case one industry suffers, or several so that you don’t get hit by a lethal blow.
Even if you have sufficient expertise and insider information in a sphere, the market is an unpredictable force, and many events can occur in the world that may undermine your assets. That’s why it’s important that you don’t get hit from all sides. If you’d like to learn more about diversification, click here.