Save Spend or Invest- How to Manage your Money?
When you start earning,
money starts pouring in and the most vital question about money that becomes
important is how to manage your money? The Personal finance education needs to
start young in life as it is the basics of future. At every stage of your
lives, when you earn money, you will be faced with 3 choices: save, spend, or
invest. How you earn money and the way in which you implement these decisions
will evolve with different phases in your life. Save, spend or invest- how you
manage your money is the most important aspect of your financial planning for a
prosperous future.
A person who puts a
portion of his pay cheque in a savings bank account of fixed deposit is
fundamentally a saver. He may think of himself as an investor but from the
point of this choice- Save, spend or Invest- how to manage your money? ,he is
not. He objective is to withdraw the money many years from now and spend it. At
that point he may become an investor because his objective will change towards
getting an income from his money, but until then he is a saver because he gets
no income.
Why should you Save Money?
An investor saves money
to invest it and get an income stream. A good investor can obtain more
risk-adjusted income from his savings than a poor investor. But the question is
why should you save money?? The main reasons are:
- Happiness or peace
of mind
Saving money is one of the best habits people can take to increase
happiness. A regular saving habit increase the satisfaction level of the person
and give them a peace of mind as the cushion of having money to meet the family
and personal expanses is quite important. If you have no money, it is not
possible to meet out you necessary expenditure for today or tomorrow.
- Fulfill
your Dreams
Saving
is the biggest tool to realize your dreams. If you want to make your dream come
true like buying a house or a bigger car or most importantly going on travel to
your choicest place, it is a must to save money. The biggest regret people have
is that they did not save the money to fulfill their desire at the right time.
In order to realize your dreams, start saving money early.
- Emergencies
We
hope that emergencies won’t happen, but we all know that they do. A family
member can develop a health issue, you might need to make an emergency trip,
you may have a car to get repaired suddenly, severe weather could flood your
house or you may have to pay for any other unforeseen expense. Any of these
emergencies can be expensive, and we are likely to encounter some sort of
emergency from time to time. So why not be prepared rather than potentially
become another victim of an emergency.
Why should you spend?
Spending is the act of
disbursing the money you earn. You can’t save all the money you are earning as
money is required to meet many daily expenses and to sustain. Whether to buy
food, household goods, house, furniture and consumer durables as well as
luxuries like car, fancy clothes, travelling, all this can be done only if you
spend money. But while doing so it should be kept in mind that money is not
everlasting and should be spent wisely.
Why should you invest?
Investing is the art of
building wealth (financial or personal), before you write a cheque, whether it
be to your bank or your broker, be honest with yourself about what is
motivating you to make that financial commitment. The only way to attain
financial security is to save and invest over a long period of time. Investing
is to make your money work for you. You should invest because:
- Your money earns
money
Someone
pays you to use your money for a period of time. You then get your money back
plus “interest.” Or, if you buy stock in a company that pays “dividends” to
shareholders, the company pays you a portion of its earnings on a regular
basis. Now your money is making an “income.”
- You buy something
with your money that could increase in value
You
become an owner of something that you hope increases in value over time. When
you need your money back, you sell it, hoping someone else will pay you more
for it.
Finally, when you start
earning, learn the best habit of saving early, spend wisely and invest your
money prudently to build wealth and be financially secure in future.
Indian indices settled down. Weakness in global stocks triggered a sell-off on the domestic bourses on last trading session of the week, Stock Tips.
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