Why Saving for a Rainy Day is not Enough – Save to Invest!

Saving and investing has never beat the fun that comes with spending. You know, traveling, partying and shopping for fashionable outfits is so much fun. However, this comes with a future price to pay, especially if you spend all you earn. Saving requires will power and discipline.

How do I start?

Start with a plan, it is the very first step to achieving your financial goals. Write down your financial goals. What do you want to achieve?

Break down your goals into short term and long term goals. An example of a short term goal may include having enough savings to meet unexpected expenditures which may be classified in a period of one year.

Long term goals may cover a period of five years or more and may include plans like buying a house. After how long do you want to achieve it? What do you need to do in order to achieve the goal?

Write down the amount of income that you generate in a certain period of time, then write down the amount you spend, and don’t forget to illustrate how you plan to spend it. This is to avoid loopholes and unnecessary expenses.

In short, make a budget.

Choose a saving plan

The second step is to choose where and how to save. There are lots of investment plans available that ranges from banks to insurance companies and SACCO. I would advise you to go for a well established SACCO, since there are many benefits that come with it, like lower interest rates on loans.

You may choose to have a monthly direct transfer from your salary account to your savings account. Automatic transfer is safer and minimizes the chances of missing a month’s savings.

Come up with an investment plan

At this point, you may need the assistance of a financial adviser to help you make several decisions that might not be very straightforward.

There are numerous investment plans available. They can be classified into high risk, moderate, limited risk and lower risk plans.

Lower risk plans have lower returns, meaning the plan may take sometime before realizing the planned or expected returns. However, the risk of losing your capital is very small, meaning it is safer.
High risk plans have very high returns, however, the risk of loosing your capital is high, meaning you can either lose big or win big.Just to highlight, some of the high risk plans include futures, speculative options,mutual funds, precious metal and mining.
Moderate risks include small company stocks and rental real estate, while an example of limited risk is US treasury bonds and notes.
Lower risk include long term savings accounts, fixed annuities, money market and US treasury bills. Depending on your goals, risk aversion and the amount of money available choose, an appropriate and suitable plan.

It is important to note that the earlier you start the richer you become!

Love your friends? Share the article with them on social media, let the money pile up by refusing to just save but also invest and enjoy the returns. Enjoy your returns and get that property that you always wanted!

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