When the money in our accounts starts to dwindle at the end of the month, we typically think about saving more and making better investments – the problem is that financial planning isn’t always easy.
While experts agree that there are no magic techniques or miracle cures for saving money rapidly, they do agree that proper planning and management will go a long way.
While you can utilize ways such as the Japanese Kakebo method to help you plan visually and enhance your saving methods, here are some more suggestions to help you save and invest better.
1. Set goals for yourself.
Saving $2,000 is not the same as saving $10,000, according to Paula Satrstegui, financial planning director at Abante Asesores, who told Business Insider that the first step is to define goals and know exactly what you want to achieve with your funds.
Setting goals entails determining how much profit is required to achieve those objectives, as well as determining whether those objectives are reasonable.
After you’ve determined how much profit you’ll need, you can start planning your investment strategy. To do the latter, make sure it’s prepared with your investment profile in mind, as well as the timeline by which you want to reach your objectives.
2. Determine how much money you can save.
It’s critical to understand how much money you can save on a monthly basis. That means knowing how quickly and to what extent your savings will help you attain your goals, not merely saving $100 here and $200 there.
“At first, you’ll need to create an annual budget, keeping in mind that you’ll need to include in annual expenses like taxes, insurance, and more,” said Javier Niederleytner, a professor at the IEB’s Master’s in Stock Exchange and Financial Markets. It’ll be easier to estimate how much you’ll save this way.
3. Maintain a tight grip on your spending.
“When we first commit to anything, we often don’t know where our money is going,” Satrstegui explains.
For instance, if you join up for a free loyalty card, you may later be charged without even realizing it.
Because the payments are normally little, under $20 per year, they may go overlooked if you don’t check through your bank statements carefully.
4. Determine how much profit you’ll need.
You can calculate the profit required to reach your goals if you have a goal and know how much you can save on a regular basis. If you keep all of your money in one account, inflation will eat away at it, and you may find yourself with the same amount of money you started with, but it will be worth less in a few years.
That is why it is critical to plan ahead. Planning is what will either help you to reach the profits and goals you set out for yourself within the timeframe you set for yourself, or it will alert us to the fact that the aims we set out for ourselves are unattainable.
With interest rates at historic lows, neither fixed income nor savings offer very appealing returns. As a result, you may have to choose between investment funds and other sorts of investments.
5. Understand your risk profile.
“Your risk profile is determined by your psychology and may be broken down using the bungee-jumping analogy: some people go bungee-jumping, while others do not since it is not in their nature. There are people who take chances in their lives and those who do not “According to Business Insider, Victor Alvargonzález, an investment expert,
Establishing your risk profile will assist you in determining which products are appropriate for you to invest in. Someone with a cautious profile, for example, will have less stock market exposure than someone who is willing to take more risks.
“You shouldn’t spend life on the edge all the time — you can’t prepare for everything, and we shouldn’t be lulled into a false sense of security by perpetual thrill-seeking,” Niederleytner says. It’s also crucial to remember that if you’ll need the money right away, it’s probably best not to invest it. Instead, invest just what you won’t need right away.
6. Invest in the appropriate things at the right time.
“You have to buy when the market is correct,” Alvargonzález added.
Certain products are only appealing for a limited period, according to the expert. He believes that this is an excellent moment to buy European stocks, for example. It’s about looking at macroeconomic development prospects on the one hand, while also observing that European stock markets haven’t yet appreciated as much as those in the United States.
7. Invest in a variety of things.
Don’t put all your eggs in one basket, in other words. Investment funds are one method to avoid falling into this trap, according to Satrstegui. You can mix multiple different sorts of investments into a single product this way.
Alvargonzález emphasized the importance of diversifying by purchasing valuable assets in and of themselves, stating that if you buy one to balance out the other, the total will be zero in the end (if one goes up, the other will go down).
In addition to following these procedures, you should consider if you know enough about money to manage your investments. If you’re not financially savvy, you can always seek help from a financial expert.
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