The importance of saving and investing together and what are the steps that help in achieving this in an effective way.
The culture of saving and investing began to emerge to obtain a successful financial life, after some acknowledged that saving alone was not enough to achieve their financial goals.
Saving makes you control and manage your expenses in a way that suits your monthly income, avoids you debts and then fails to pay them, but the investment helps you to increase your income and manage your savings. So many people saw good savings and investment together as the foundation for a successful financial life.
8 steps to help you successfully save and invest together
Determine the aspects of income and spending
– Income: There is a difference between the basic salary (income) and the net income. The net income is the sum of the basic salary next to bonuses and allowances and any wages it receives for any other additional work, and then all government deductions (fees and others) are subtracted from it.
Expenditure: One of the easiest ways to identify and track spending aspects is to review invoices and monthly bank statements. This enables you to analyze your expenditures, “How do you spend and what are you spending?” To determine which items you can reduce or remove from your spending list.
Hence the beginning of the savings / savings plan: Subtract your total expenses from your net income to get the amount that you can save every month.
List and categorize your goals
Through your financial goals, you can know your investment needs. The goals are a flame of light that guides the path of our financial life. So list your goals and break them down as follows:
Short-term goals: are goals that are achieved within a short period of time, usually between one or two years.
Medium-term goals: are goals that are achieved over a longer period of time, between five and seven years. And there you have the opportunity to invest and make profits.
Long-term goals: These goals are distinguished by a long period of time and usually take the form of retirement or other goals that are desired to be achieved within ten years and more.
Classify your goals and define them according to period to set a suitable timetable for achieving them
Calculate the value of all your savings
The importance of this step is to determine and evaluate the real amount that you saved. Your savings determine your financial position more than your net income, and may include the amounts deposited in the bank, the amounts held at home, and other gifts in the form of financial sums.
If the total value of these savings is small then this means that your savings plan is ineffective and needs to be changed (increasing net income or reducing spending more).
Evaluate your investment needs and your risk tolerance
You are not required to take a specific approach when starting to invest, as the investment tools differ according to the investment needs and the degree of risk tolerance that varies from person to person depending on the appetite for his investment.
There are those who invest in the stock market and love their risk, and there are also those who invest their savings in fixed deposits and savings accounts, and they are extremely afraid of risk.
It does not matter which approach to take, as they all reflect financial goals that differ from person to person. So do not make this issue a burden for your decision making, my mouth is like a measure to define the parameters of your investments.
Seek help with experience
After assessing your investment ability, a plan must be drawn up to direct your money and savings in various investment instruments to suit your needs and goals. This step may need expert help or financial advice to make an effective plan while avoiding common mistakes.
It is an amount of money that is set aside for emergency situations and to deal with unexpected financial burdens and problems, so that your investment plan is not destroyed and its course is changed so that it becomes a loss due to unexpected events, God forbid.
The value of this amount ranges between 3 months to 6 months of your salary, knowing that this amount cannot be used in specific investments in a specific period of time such as a fixed deposit.
Start retirement planning
Make your plan for retirement among your long-term goals, and try to start it early so that you do not feel restless when you retire and your monthly income decreases, even if with a small monthly amount that increases gradually with increasing your income.
Flexibility of your budget and investment plan
Your investment plan must be flexible and subject to change when needed depending on the events and changes accompanying you, for example your salary that you were getting at the beginning of your financial life and your investment plan was built on it, the income will likely increase after a while and then you will have additional money that you want to invest and so on.