Saving and Investing

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According to the University of Minnesota Extension, “4 in 10 adults, faced with an unexpected expense of $400 would either not be able to handle it or would need to borrow the money or sell something to cover the expense.” That is why saving and investing into your financial future is so important. Think about including savings into your monthly budget, even if you only put in $50 for the month. Saving and investing at an early age will help to put you in a better spot when it comes time for you to retire.

I’ll be sharing my personal budgeting tips and other tips that are useful to help anyone start their budgeting journey!

Saving

Saving is identified as money that you put aside from income you received for the future. Many people fail to save, because they’re thinking about the current debt or bills they have to cover. If you can assess all of your expenses and create a budget, you should think about including savings into your categories.

Take this example, if you get paid $4,000 per month or $2,000 biweekly, you’ll deduct the amount you need to pay for mortgage/rent, utilities, and any other fixed expenses you have such as credit card debt. Leave yourself with enough to get by until your next pay period and put at least $25 into savings for that pay period. Thinking about saving $25 biweekly may seem like nothing, but isn’t it better than not saving anything at all? Chances are you would probably use that $25 on something that isn’t needed. Now, if you add up the $25 you put into your savings biweekly, that will equal out to $600 annually. If you change your biweekly amount to $50 ($100 per month), you’ll save $1,200 for the year!

Investing

Investing is similar to saving, where you would put money aside, to a specific account for your financial future. If you have money in your 401K from your current/ past employers, this is considered an investment and an account you do not want to touch until retirement, otherwise you will be charged a penalty. There are many different types of ways for people to invest and a lot of different things to invest in, so it is important to do your research first to see which will best suit your financial goals. If you are unsure of where to begin, it is best to consult with a financial advisor, because they are there to help you make the best financial decisions. Some common investment options are:

1. Stocks can also be known as shares, which represents ownership in a company.
2. Buying a Bond means you’re basically lending money to the issuer in exchange for regular interest payments and return of the principal amount at maturity. Meaning no matter what, the investor will get their initial investment back.
3. Mutual Funds and EFTs (exchange-traded funds) are like a basket of investments, that let you invest in many things at one time without having to purchase them all individually.
4. Retirement Accounts are accounts that are designed to help you save and invest for your retirement, such as a 401k or Individual retirement accounts.
5. Real Estate involves purchasing a property with the intent to make a profit.
6. Savings Accounts and CDs (certificates of deposit) are types of banks that allow you to save money. You can store money in a savings account and have easy access to the account, whereas when you open a CD, you are not touching that money for a period of time; AKA term or maturity.
7. Education Savings Accounts are designed to help families save for education expenses and come with their own benefits.
8. Index Funds are a type of mutual fund or EFT that essentially copies what a group of companies or assets does in the stock market.
9. Dividend Stocks are shares that get paid out on a regular basis from owning a piece of the company. Good for people who want potential growth in stocks and extra income.
10. Peer-to-Peer Lending is a way for individuals to lend money without using a bank. If you are starting a business, you might ask a friend if you can borrow money to start up instead of going to the bank for a loan.
11. Precious Metals involves buying and holding on to valuable metals (gold and silver). These items can go up in value in the future and can be used as a safety net for your finances.
12. Side Businesses or Entrepreneurial Ventures are great if you can make a profit starting up your own business.

Remember you won’t reach financial freedom over night. It takes effort and planning to ensure you are on the right path and are important for your financial future. The outcome can be very rewarding if you allow yourself to put in the work.