"Financial peace isn't the acquisition of stuff. It's learning to live on less than you make, so you can give money back and have money to invest. You can't win until you do this." - Dave Ramsey
1. Make a Plan:
You’ve to determine your goal and work out your other plans accordingly. If you wish to earn and invest together then you should make a chart, calculating your income and taxes. You should decide the reason to save or invest for example; retirement or any life event. Only after settling on one purpose you can put your disposable income to best use. An appropriate way to save money is to predicate the percentage of income you can save and then keep it constant, ergo avoiding over expenditure.
2. Balancing the Numbers
If your income is enough to get your expenses covered and still make investments, it is to be divided in parts. There is a saying that ‘Do not put all your eggs in one basket because if that basket falls you lose all of them at once’. Similarly, you should not put all the money in one place, per say in gold is a great metal to invest in, but you cannot predict the market of jewels. So, it will be safer to put some of it in mutual funds. Now even if gold’s value decreases in the next year, you won’t face a total loss.
Albeit, considering that investing in more than one places is secure but too much of anything is violable easily. If you park your funds in a lot of places then it can become appalling to maintain the accounts of all investments. This will result in the complications that you are trying to avoid in the first place. Refrain from making such mistakes. Just like Benjamin Graham said, “A great company is not a great investment if you pay too much for the stock”.
3. Examine returns of last 5 years
This is one of the most important steps. Like, when you wish to gather all the knowledge about politics, you go on the internet and search for the most common thing that is how government has worked in its previous years of ruling? Taking it from Warren Buffet, “In the business world, the rear view mirror is always clearer than the windshield.” Alike with investments, you should go through the returns of last 5 years from that medium. Former year verification will help you analyze the where and where not’s of your investments.
4. Reach for a Financial Planner
Normally, businessmen lack the proper knowledge of investment and how to get higher returns from it. A financial planner can help you in that area. Just like when J.K. Galbraith told us, “There are two kinds of forecasters: those who don’t know and those don’t know they don’t know”. A financial planner can study the market better than you, because that’s what they are experienced in. Rushing into investments is not healthy for your bank balance, so, it’s safer to get a financial planner and understand the pros and cons of every investment, to take a fully informed decision.
5. Pay your debts first
Many great economists believe that your debts are your best investments. Whether, you are running a firm or working as an employee, you’ll have debts like house loans, car loans, personal loans etc. So, you can focus on which one gets you relieved the most. Like, paying off the one with the highest rate of interest (note that we are talking about the disposable income excluding expenses). This will leave you with one less loan to pay in future and one more investment opportunity to capitalize on.
Investments have always been tangled but not too tricky, you just need to pull the right string. So, the good news is investing doesn’t seem so hard anymore and you should definitely go for one.
Food 4 Thought
“A good financial plan is a road map that shows us exactly how the choices we make today will affect our future.
- Alexa Von Tobel ”
DID YOU KNOW
87% of adults say they are not confident about having money for a comfortable retirement.