How to Make the Move from Saving to Investing: Beginner’s Guide on Investing Money

Investing your money early in life is one of the smartest decisions you can make. Let’s unpack this. By investing your money, you are:

• Taking control of your finances
• No longer bound to employers who control your wages
• Able to set your own financial goals based on your lifestyle
• Able to set aside and save money for your future in unique ways, such as stocks or mutual funds
• In a position to contribute to your retirement account and save money for your long-term financial goals

An excellent resource that you can use to find out about the different investment options can be found at https://thorstenwittmann.com/.  To point you in the right direction, we will go over a few tips on how to start investing and saving money.

1.   Understanding How Saving and Investing Differs

Before you start investing, you must first understand what saving and investing money means. To start saving money, you need to set aside a portion of your monthly income for short-term needs. An example of this is an emergency fund such as an unexpected hospital visit, a house deposit, or a short vacation. The main goal of saving your money is to have money available when you need it. The easiest way to start is by creating a low-risk account such as a savings account, certificate of deposit (CDs), or a money market account.

Investing your money would mean putting your money into assets or accounts such as stocks, bonds, real estate, or mutual funds. The main goal of investing is to grow your wealth over an extended period. Ideally, when you invest your money, you aim to earn a return on your money through appreciation or income from the assets in which you invest. Investing is generally considered to be higher risk than saving, and the returns can be higher or lower depending on the investment and the market conditions.

2.   Create a Budget

Starting a budget is another key step in managing your money and achieving your financial freedom. Having a budget gives you a better idea of how much money you can put towards saving and investing. Here are some steps to help you create a budget:

• Collect your financial information. This will include information about your monthly income (including bonuses and commissions) and expenses (including bills, rent, and medical aid)
• Identify all of your monthly expenses. This should include fixed expenses such as rent, car payments, and insurance, as well as those such as groceries, entertainment, and clothing
• Set your financial goals. Once you have a better idea about your income and expenses, you can create goals such as saving for a down payment on a house or building an emergency fund
• Create a budget. Using the information you’ve gathered, create a budget.
• Once you have a budget in place, track your spending and stick to it

3.   Create an Investment Account

To start your investment journey, you will want to open a traditional investment account to begin investing your savings. Several investment companies will offer their clients free online accounts that can be opened in minutes. Once you have opened your account, you can begin investing in several different types of funds. The type of investment will depend on your investment goals.

An excellent starting point is a money market fund, as there is minimal risk. This fund is also known as a cash equivalent fund, and they do not earn any interest. They are considered low-risk, so they are a great starting point for beginners. However, suppose you prefer to earn some interest on your investment. In that case, you can start with a mutual fund or stock index fund, which is less risky than individual stocks.

4. Seek Professional Advice

Before making any major decisions when investing money, it will be best to speak to a financial expert first. For example, a financial advisor will be able to explain the advantages and disadvantages of different types of investments, and they will help you decide which ones are most suitable for your goals. Furthermore, a financial advisor can help you identify, understand and manage the risks associated with investing. Once you are aware of these risks, you and your financial advisor can create a risk management strategy that is tailored to your specific needs.

The Key to Saving and Investing Your Money

In today’s world, nothing is certain. As such, saving and investing money as early as possible will be in your best interests. When it comes to something that is as complex as money, it is beneficial to make an informed decision. This article is designed  to help you achieve this goal.