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Should You Be Investing or Saving Right Now?



Investing or Saving Right Now

Photo by Karolina Grabowska from Pexels

Whether to invest or to save is never an easy question to answer. It depends on so many different factors that it can be quite mind-boggling to understand the various factors you should consider.

Here is our short guide on when to save and when to invest, depending on your goals and financial situation.

When to Save

It’s better to save than to invest if you have a short-term goal in mind. For example, if you want to save up for a holiday or a new car, or if you are saving for a wedding.

Saving is also the first step you should take if you don’t currently have an emergency fund. This is the money you will spend if something unexpected happens. For example, if your car suddenly breaks down, if you need to replace a major appliance, or if your friends or family need an emergency loan.

You should have three to six months’ worth of living expenses saved up in your emergency fund. This will provide a cushion in case you lose your job or face another emergency.

When to Invest

You should only consider investing when you are ready to accept a certain level of risk. True, there are investment options that are considered very safe, but you never know what can happen to the world. If you don’t need the money for at least five years and you’re ready to see some of it go, you can invest it.

Only start investing after your emergency fund is properly topped up and you have paid off any high-interest debt. This could be your credit card debt, for example. It does not include your mortgage or any student loans, which usually have a low interest rate and which you can keep paying off even with an investment.

You should also consider investing if you have long-term goals that you know you won’t be able to save up for with cash. This could be your retirement, your young children’s education, or a house abroad, for example.

Best Ways to Save Money

If you decide to save money, think about the best ways to do it. Your first step should be to find a good savings account. Speak to multiple banks to make sure they have what you are looking for. Read the fine print and have the clerk walk you through all kinds of eventualities.

Once you have an account to put money in, you should consider how you will acquire said money. Here are some good places to start:

  • Before you spend any money on bills, groceries, or wants, automatically set aside a specific amount every month. Pretend this money does not exist until you reach your savings goal.
  • Write down all of your expenses. After three months, take a look at your list and see where you can cut back. You may discover that you’re spending too much on takeout or for services you rarely use.
  • Wait before you buy anything you want but don’t need. You can buy it on sale at a later date. Or, you may discover you no longer want to buy it after the initial interest has died down.
  • Consider cutting down on your major expenses, like transportation and food. Carpool instead of driving your own car, or walk when you can. Make most of your meals at home, and create a weekly food shop list. Don’t buy anything you’ve not planned for: this will help reduce waste and help you save.
  • Consider switching your cable, mobile, and internet provider. Most companies offer major discounts to new users, so you can save quite a lot if you make a switch.
  • Save on your electricity bill by turning off all lights and appliances when not in use.

Best Ways to Invest Money

If you decide the time is right to start investing, you will need to consider the best type of investment for your situation. Here are some of the most common options:

  • Stocks are a great option if you want to play the stock market. You can start by investing in some blue chip stocks that are more likely to pay well. You can also consider some newer and potentially higher-yielding stocks, such as artificial intelligence stocks, which are currently trending. Note that you will need to invest a fair amount of time to monitor the stock market and that you will need to diversify your portfolio to prevent any major losses.
  • You can invest in bonds, either issued by companies or governments. They can be a safe way to earn an interest down the line, provided that you choose them wisely.
  • You can also choose to work with a fund manager, a stockbroker, or another type of investor. They will take charge of your money for you, for a certain fee, and invest it for you. This can be a great option if you don’t want to deal with the process of investing and want to rely on the expertise of someone who has been in the financial business for a long time.
  • Investing in property or a business is also a good choice, provided that you already have some money set aside.

Wrapping Up

Hopefully, you now have a clearer idea about the next financial steps you should be taking. Before you do, make sure to do plenty of research. Carefully analyze what you want to achieve and where you currently stand.

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