Grow Your Wealth: Learn the basics of Savings and Investments

Grow Your Wealth: Learn the basics of Savings and Investments

Hello everyone..! I'm glad to see someone got interested in finding ways to save their money. Don't be hesitant; broaden up your mind and read through this. I've got some great tips just for you.

Quick Definitions

Savings :

When you take a part of your income separately and keep that aside from your expenses, only to save it for unexpected future emergency happenings, it is known as Savings.

Investments :

It is the action of using a portion of your income to generate extra income from it by buying valuable assets that may multiply their value in the future. For example, properties, shares/stocks, funding businesses, mutual fund shares, etc.

Difference between Savings and Investments :

Why savings and investments are important?

Do you think money plays a significant role in your life?

Yes, of course it is. You need money to do anything and to survive in this world. Money gives you the security to thrive in this world.

Having money, you can lay your dreams assuredly on anything like buying a dream home, a luxury car, going on a world tour, initiating a business, buying assets, retirement savings, savings for future generations, etc.

Money gives you independence. You don't have to depend on anybody else when you are capable of doing things on your own.

You can be tension-free about your unexpected future emergencies if you have your savings with you. You can tackle any difficult situation with your savings.

Should you save first or invest?

Undeniably savings come first. If you save little by little, penny by penny, it will grow into a huge sum. Then you can use this sum to invest in anything according to your desires or goals.

How much of your savings should you invest?

Save or Invest?

When you invest in something, you cannot withdraw your money in the halfway. If you invest every penny of your savings, then you may suffer later on when the situation arises.

So, even if the investment returns are so high, it is not advisable to invest everything that you have. It is very important to withhold some of your savings for emergency purposes.

How much should I save and invest per month?

When it comes to savings and investments, it's important to have a plan in place. This means setting financial goals, creating a budget, and deciding how much money you want to save and invest each month.

It's also important to consider your risk tolerance, which refers to how much risk you're willing to take in order to achieve higher returns.

One of the most important factors in successful saving and investing is starting early. The earlier you start, the more time your money has to grow.

When should you start to save or invest?

Start to save or invest with utmost priority. There are no right age guidelines to start investing. You just need the knowledge to do so.

Whenever you start to earn, you should save for yourself and after saving a sufficient amount, you can start investing.

The sooner you invest, the greater the money returns. When the period is elongated, your money grows over time.

For example, if you start investing $100 per month at age 25, you could have over $300,000 by the time you retire at age 65, assuming an average annual return of 7%. However, if you wait until age 35 to start investing, you would have to invest over $300 per month to achieve the same result.

What are the ways to save money?

First of all, set your savings goal and stick it to a place where you can often see it. It helps drive your enthusiasm throughout your journey and will motivate you to achieve your goal.

Keep track of your spending. Check whether all the expenditures are essential. Cut off all unnecessary expenses promptly.

Lessen your necessities. Plan a budget for your monthly expenses. No matter what, stick to your budget strictly.

You can also save your money in banking sectors through a savings account. But you should not spend money from your account leisurely.

You can also use the old methods like saving in a piggy bank. Do not add up the amount and keep the sum in your mind. Or else your brain will think of a purchase plan for your savings.

Saving/Budget rule :

There are a few rules which are proposed for savings. Some of the rules are mentioned below :

  • 50-30-20
  • 40-40-20
  • 70-20-10
  • 60-20-20
  • 80-10-10

1) 50-30-20 rule :

This rule suggests you spend 50% of your income on essential needs like housing, groceries, transportation costs, utility charges, insurance due, other dues, etc.

Spend 30% on your wanted list which includes travel expenses, movie times, restaurants, shopping, and other likeables.

Set aside 20% of your income for your savings.

2) 40-40-20 rule:

It is the same as above but only the contribution is different.

This rule suggests you spend 40% of your income on your needs 40% should be saved and 20% for your additional needs.

3) 70-20-10 rule :

A big portion of your income, 70% is allocated for your life expenses, while 20% is portioned out for savings and the remaining 10% is set aside for your extra needs.

4) 60-20-20 rule :

In this, 60% of your income is allocated for your necessities, 20% is kept aside for your extra needs and 20% is kept for savings.

5) 80-10-10 rule :

According to this rule, 80%, a huge lump of income goes for the daily essentials and also for the extra needs. A 10% goes into savings and the remaining 10% goes to charity work.

Types of Investments :

1) Fixed Deposits :

Fixed deposit, also called FD in short, is an investment plan that is provided by the banking sectors or other financial establishments. The minimum amount that can be deposited in FD starts from Rs.1000.

FD is where you deposit an amount as per your capability or your needs for a specific time period at a fixed interest rate.

After the maturity period of FD, the amount deposited will be returned along with the interest rate amount fixed initially.

2) Investing in Gold :

Of all available jewelry elements, Gold is the most widely used element for ornamental purposes universally. Hence, investing in gold is one of the best ideas, which has very low-risk management.

The gold market is subject to change according to the other markets. It doesn't require any kind of paperwork to invest in gold, except for money.

If you have enough money to buy gold, then you can purchase it and keep it for personal use or you can sell them when the market value is high.

3) Stocks :

A stock is also known as a share. It may be of a company, a business, or from online trading.

A stock indicates an ownership of the company as per the % of the shares you own. If you own a share then you are called a shareholder or a stockholder.

You can buy stocks from a stock broker or through various bidding platforms. You can choose your investment plan and amount, that you desire to buy or sell in the market and can handle the tradings yourself.

4) Mutual Funds :

A mutual fund is a kind of investment that blends in funds from numerous investors which is then assorted into various forms of sectors for security purposes.

By this diversification, the risk is reduced. Also, be aware of the fraudulents before investing.

5) Real Estate :

This is one of the best ways to invest in, to expand your wealth. There are many ways in real estate to boost and multiply your revenue.

One of the easiest ways by which investors can make money is to own a property and intend that property for rental purposes.

The next way is to become a flipper, in which you buy an unvalued property for a lesser value and furbish that property to increase its selling value and then sell it for a higher profit.

This method is mostly used to obtain a quicker profit.

6) Bonds :

Bonds are typically a kind of loan, in which the investor tends to lend to a borrower. Here, the borrower might be an organization, government, company, or corporation.

In bonds, the later income is fixed at the time of buying the bonds. The borrower issues the bond to fund its operations.

The investor buys the bond and lends money to the borrower. The investor receives the bond amount with its interest at the termination of the bond.

The bond value is subject to change over time as it depends on the market value.

7) Investing in Startups

Another easy way to gain profit is to invest in startups. You don't have to do any specific work or research to upgrade or worry about risk management.

All you have to do is invest in some startups and just follow up with them. The startup should be profitable for investors to invest in it.

Investors can invest in startups to help them grow and to help them reach out to a wider base. Meanwhile, the investors also can receive good returns from the startups.

End of the line :

You must gain control over your money or the lack of it will forever control you. Many people spend money they haven't earned, to buy things they don't want, to impress people they don't like.

It is necessary to retain the 6 monthly emergency fund as a safekeep for the sake of oneself and one's family. It is nothing but to keep hold of your 6 months' monthly expenses for security purposes for emergencies.

A penny saved is a penny earned.

Successful savings happen at the beginning of the month, not at the end. So, do not save what is left after spending, but spend what is left after saving.

Grasp in all the saving plans and implement that in your savings. And beware of little expenses. Cause, a small leak will sink a great ship.

A budget is a thing that tells your money where to go instead of wondering where it went. The safe way to double your money is to fold it over once and put it in your pocket.

Investing put money to work. The reason to save money is to invest it. If you buy things you do not need, soon you will have to sell things that you need.

So, use your money wisely and try to save most of it for your good.

By creating a plan, starting early, and diversifying your investments, you can maximize your returns and minimize your risk.

Remember, it's never too late to start saving and investing, so start today and watch your money grow over time.

Happy Saving..!