Now that I am aging, I understand that having some savings in the bank is not and is never enough. Way, way back I should set aside money in several safe places where it should be earning well above my one, single savings account.
If you have the chance now to do what I had failed to do, these are the things you should probably be thinking now according to some money related readings I came across:
1. Think about becoming an investor. This is really a difficult decision to make but you can make time to study, consult, confer with professionals, ask around from those who's been there. They say that it is really common sense and a commitment to deliberately know facts and fallacies about handling money.
2. Becoming an investor means that you have enough funds stashed away equivalent to 6-9 months worth of living expenses in savings. This will provide a temporary protection against a financial setback, an illness, or losing a a job and would serve as the liquid or cash resources from which money can be drawn from.
3. Always bear in mind that earnings from investment are always seasonal. There are ups and there are low periods.
4. Making investments depend on many varied conditions and factors that need to be studied carefully and soberly like, how much money there is, age, market conditions, and certain family responsibilities.
5. Investments may be conservative, speculative or aggressive. Conservative investments takes safety as the primary mode of action. Income is a major consideration as well but at the same time takes money preservation as the action that oils the investment gear. It provides peace of mind but gives poor protection against inflation and interest rates. Retirees, as well as individuals near retirement and even fixed or moderate income-d individuals can well use this investment tact. Examples of conservative investments: time deposits, treasury bills, treasury bonds, blue chip stocks
6. Aggressive investment requires a laid back approach about handling and moving money. It is all about total return which means there is income but there should also be price appreciation. This investment style is comfortable to sell in order to earn profits. Individuals with substantial income, 20-30 years away from retirement and can do without investment income for his daily living. Examples of aggressive investment instruments: quality growth stocks, corporate utility stocks, real estate.
7. The speculative investment stance is to out manuever the market and the competition. Competition, meaning other speculators. Speculative investing demand a lot of research and study. It also requires that the speculator is comfortable losing (what they can afford) money big time because he is a professional and very well-off. Examples of speculative investments: take-over schemes, precious metals, distressed real estate.
If you have enough money on savings meaning your personal financial goals are secured, and enjoying a lifestyle you planned for, it still remains prudent to save continuously and regularly. Better yet, money which is not part of a regular employment or business income may well be invested. Now where do these wind falls normally come from? Gifts, bonuses, salary raise, matured automatic savings plans, inheritance, or maybe, company savings plans.
And also one important rule in investing - diversification. But that should be covered by another post.
So, if you think you are ready to move from saver to an investor, information is all over the web. All you need to do is find the time to do some serious and deliberate effort to study.
Allow me to ask, are you ready?