Making the right decisions with your cash is crucial to becoming financially independent. Unfortunately, it isn’t always easy to figure out when you should be spending your cash on future opportunities, and when you should be saving it for a rainy day. If you’ve had some extra cash in your bank for a while now, you might be wondering whether you’re better off investing that cash or leaving it untouched. Today, we’re going to walk you through the basics of making the right decisions with your finances. Remember, although the best bet is usually to use both a combination of saving and investing to unlock the full potential of your future, it’s important to find a strategy that meets with your needs and risk levels.
When is Saving a Good Idea?
As you probably already know, saving is all about putting money aside, so you have it for future goals, or unexpected expenses. Usually, many save to accomplish something specific, like having enough cash for a family holiday or a deposit on a new home. However, you can also maintain savings that are there to protect you if something goes wrong in your life. Most experts recommend that it’s important to save if you don’t have any cash aside to help you out if something disastrous happens in your world.
It’s recommended to have at least 3 months’ worth of income available, so that you can pay for emergency events if you suddenly lose your job, or something else happens that throws you off track. After you’ve got your emergency fund set up, it’s generally useful to save around 10% of your income each month to whatever else you might want to accomplish with your cash next. Of course, you can put saving on hold for a while if you have debts that you want to clear first.
What About Investing?
It usually makes sense to think about your investment opportunities alongside saving solutions. With the right education and technical analysis, you can use your investments to build your cash and improve the amount of savings you have access to. You’ll need to think about the kind of actions you’re going to take to build your money, however. The sort of strategies that you use for short-term goals will be very different to the ones that you embrace for long-term wealth development. Do your research and ask yourself what kind of investor you want to be.
If you’re keen to develop some more money in your nest egg for retirement and future opportunities, then you can place some relatively low-risk cash into long-term strategies that deliver interest and dividends over time. If you’re looking to start seeing the impact on your lifestyle right away, then you’ll need to take a little more risk for immediate results. If you’re not sure where to get started, you might find that talking to a financial advisor will be a good way to explore your options. Remember, it’s also possible to open accounts with online brokerage companies that allow you to test your strategies and see how your skills will pay off without spending a small fortune on accidents.