Investment is a step into a financially free future. We have been talking about how you should save, invest, get to know your investment personality and how to be a good investor. I am sure a lot of you may be wondering what the value proposition for getting into this in the first place. Aside from the fact that we all need extra money, we want to be able to provide for ourselves and others in every way possible. Say for instance you want to go for a vacation in Abu Dhabi. You have calculated your cost; - Visa – Ticket – hotel – shopping – food and explore money and it all amounts to N3 million. You want to go in December and this is March. This means you have to start saving for this as soon as possible. We all save towards a goal; whether it is rent, school fees, the gym, vacation, a treat, birthday etc.
I just want to let you know that saving towards a goal is the Genesis of investment. That is how it all begins. That rent, vacation, treat etc, you are investing in them to make yourself better. If you ever want to be a bad-ass investor you need to be bad-ass at saving towards a goal. Don’t worry, I’ve got you covered;
- PICK A REASON TO SAVE MONEY:
You need to determine what you are saving money for, it could be for one reason or many reasons. Your savings goal may be for the payment of rent for your home. You may be saving for a dream vacation or to pay for your next car. You may be saving for retirement or for an emergency fund. You may be saving for all of these reasons. Once you know what you are saving for, then you need to determine how much you need in order to reach each goal. Then create a plan/ strategy to remove specific amounts from your income every month/ week as the case may be.
- CREATE A TIMELINE FOR YOUR GOAL:
When you have the savings goal (what you are saving towards) and the amount that you need to save, you certainly reach your goal faster if you have timelines. This will give you additional motivation to meet your savings goals. Some timelines are simple for example you may want to go on vacation at the end of the year like I mentioned in the beginning or pay the rent for your house ready in a year. Other goals, such as saving for retirement or emergency funds, you may want to set benchmarks and dates that you want to reach these benchmarks by. For example, you may determine that you want to have N10million in your retirement savings account by the time you reach age thirty.
- SET MONTHLY SAVINGS GOAL:
In order to reach your timeline for your savings goal, you need to determine how much you need to save each month in order to reach it. This should be pretty straightforward for most of your goals, but your retirement account you should adjust to so that you consider your contributions and your rate of return that will be added to it.
- USE THE RIGHT SAVING TOOLS:
You should also find the right type of account for your savings goal. If you are looking at saving money for longer than five years, you should look at mutual funds. Otherwise, you should look for a high rate of return savings account. Money market accounts through your bank or other credible funds often offer good rates of returns. In the past, Certificates of Deposit (CDs) have offered good rates of return, but you should compare them to other accounts. You do not want to put an emergency fund into a CD because you can be penalized if you need to access the money before the term is complete.
- If you are working towards more than one savings goal, you have several options available. You may choose to put all of the money into one account and simply keep a ledger at home of what amount goes to which goal. Or you may choose to have separate accounts for your savings goals. For example, you may opt to have one savings account that is simply for your emergency fund, and another account that you use to save for rent or vacation. Saving up for your vacation can help you prevent it from ruining your budget. This will help to protect the money that you are saving for those goals. if you do end up needing to use your emergency fund you will have access to it
- If you are working towards a larger goal, you may want to reward yourself, as you reach some basic milestones along the way. This can help you stay motivated. A few splurges along the way can help you stay motivated for bigger goals. It is important to make sure your goals are achievable so that you do not get discouraged as you go.
As you do all this, you see it is no different from buying a stock and you would notice that they are interwoven. To properly save, you have to invest.
Think about it!
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