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What You Need To Know About Savings And Investments

Savings And Investments

A lot of us are getting familiar with certain terms involved with personal finance. There is no successful financial growth without deep knowledge about savings and investments.

If you are starting out on a financial journey, then this article is for you.

SAVINGS

Savings are funds you keep for future use, later spending or investment purposes. For some people, it’s pretty easy to lay aside a chunk of money for future use, for some others, it’s not. If saving money is something difficult for you to do, then here are some things you should know:

1. Record your expenses:

You cannot be a good saver when you don’t keep track of how much you spend. Noting down your expenses is applicable to little things like how much you spend on electricity, foodstuff, household items, and other miscellaneous stuff. Using a spreadsheet for good documentation is most advised.

Doing this shows you the most things that consume your money and this helps you reorder your priorities.

2. Create a budget:

Creating a budget helps you channel your money into the right and most important things. It helps you create a spending plan, according to the size of your income. With this, it will be easier for you to trim everyday expenses and decide the amount of money you want to be saving on a regular basis.

3. Set savings goals:

You might have a big project that awaits you in the future and the funds to carry it out may not be readily available. This is something that would require you to save up.

You may want to build a house in 2- years’ time or you may be expecting a baby in a matter of months.

Set short-term goals and long-term goals depending on what you want to accomplish.

4. Set your financial priorities

Separate your wants from your needs. Make savings automatic. This would help you build the discipline of not having to think twice before setting money aside for saving up.

Check your savings progress regularly and score yourself. Sit up in areas you need to and improve accordingly.

What Your Savings Can Do For You:

  1. It provides you with financial security and prevents you from being completely swept off your feet when urgent needs arise.
  2. It helps you build cash reserves that will be your springboard for taking calculated risks.
  3. It gives you the freedom to define and live life on your own terms.

INVESTMENTS

In the world of finance, investment simply refers to assets that will be of more value in the future than they are, presently.

When such happens, the asset is said to have appreciated.

Investment is a strategy that every investor uses to get higher returns later. These higher returns are termed profits.

Some common investments include:

1. Bonds:

This is a situation where you get to put some of your money into a company and have it pay you back the capital with interest as time goes on.

2. Stock or Equity:

This is when you buy out a portion or fraction of a company while you get to enjoy the profits.

3. Options:

This is a contract to buy or sell an asset at a set price on a set date. The profit comes in when smart investors are able to predict price changes ahead of time.

4. Mutual funds:

Here, money is pilled from several investors and put into different asset categories. Each investor sees profits that are dependent on the size and performance of their initial contribution.

FIXED INCOME INVESTMENTS

These are investments that produce a fixed amount of interest on principal over time.

Financial knowledge helps you gain mastery of the outside world. Stay equipped.

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