This article is going to examine some of the most effective ways to store money to ensure good future returns and which investment types suit which personalities. It will also examine savings and how to deal with unexpected events, such as losing a job.
Budgeting is only one part of good money management. Choosing where to store your money is also important. Those who just keep it in a standard bank account are losing out as the money will be losing its value through inflation, even when the bank pays interest. Investing is a great way to watch yourgrow your savings.
Where, and what, to invest in will be a decision to make based on your circumstances. For those who are young, risky investments are most appealing. If the investment goes bad, you have got time to make up for it in future earnings. For older people approaching retirement, it would be best to invest in safer options as losing money in the later stages of life can be far more damaging as your ability to earn is limited.
Personality will play a part in your investment choices as well. Even if you are young, risky investments may not be for you. If you fear that you will lose all your hard earned money in a stock market collapse, then buying shares is probably not the best investment choice.
Saving is an important part of any budget. Plan an amount that you are going to keep aside for long term saving. Young people often feel this is unnecessary as they have a whole lifetime to accumulate savings. This is a common mistake often realised by people as they grow older, take the advice now and start saving young.
Starting to save young, means that you will develop the right mind set for saving but also take advantage of the power of compound interest – the more you save now, the more that money will have grown in 30 years. When you are older, the small things you spent money on will seem like bad decisions if you do not have enough money to live comfortably.
Additionally, don’t just plan to have one set of savings. Having savings for a rainy day is important, but so is saving for retirement and for new, expensive items, such as furniture. When saving for a rainy day there are a couple of good, basic rules to follow.
The first is to be prepared; things will wear out and break down and people will lose their jobs. Having money put away for these times is essential or you may have to borrow money, which can add an additional outgoing expense to your budget. This leads onto the second rule, about how much money should be saved. It is recommended that you keep three to six months worth of expenses costs saved, this can be calculated through working out you monthly outgoings.