Before you ever think of being a successful investor, you must first start by having a comprehensive knowledge on the core differences between saving, investing and spending. This is because, knowing these things will not only help guide you on how to go about them, but will as a result, protect your financial goal.
So before we go into discussing how to spend, save and invest, lets first know what these terminologies mean in business.
Saving
So basically, the word savings, at least to a leyman’s understanding can be described as the process of keeping some amount of money aside for either an emergency purpose, or perhaps something you’ve always had in mind to buy, or better still for your children’s future wellbeing. In other words, there is always a reason why we save.
Now, the most important thing one ought to know as an investor is that if you’re looking for financial safety, savings is all you’ve got. There is just no other way. This is true because, things happen, a life threatening emergency could occur either to yourself, wife, kids or any acquaintance closest to you, which will require your instant financial help for them to survive. So what will happen if you never had any savings? Well I guess you know better.
And even though most people fear that their money might lose value while being saved overtime, there is actually a way you can avoid that from happening. Given the plethora of avenues like in putting your money inside a savings account, through certificates of deposit or even in a money market accounts.
However, you must know that since they are helping you save your money, saving accounts often attract a little higher interest rate than inflation. In other words, if you want to step up your financial goal, you will have to do more than saving, you will have to invest.
Investing
If you’re setting out to invest, you must first of all know that unlike in savings, this one is often a long and an uncertain process. Most of the times, it usually involves one putting a portion of their money into owing a share of in a particular business or enterprise with the uncertain the expectancy of receiving a higher return on your money. In other words, it involves a whole lot of risk, you could lose, you could win.
So, if you’re good with that, great! But what’s the best ways to invest? Actually, the most popular, and somehow safest means to invest your money is through stocks, real estate and bonds.
However, there is another thing you must know. If you must become a successful, avoid going for short term investments. Rather, aim for investments that will span over three years and above so that even when the value of the investment you opted into depreciates, your monetary value won’t. Now, if after hearing about savings, investment, and you still don’t feel like engaging in any of them, then what you might be planning to do is what we call spending
Spending
Spending is the act of just using your financial resources to acquire things without the need to calculate any risk or repercussions of such actions.
How to Spend, Save or Invest?
To be a little more precise, we’ll be answering this question based on the current situation here in the United States. From research studies, the American inflation rate increases by 2% every year, thus making savings a terrible option for entrepreneurs. As an American entrepreneur, if you want your business to grow financially, you must at all times render 30% of your net profit to savings, 61% to investment and the remaining for 8% for spending or leisure purpose.
And when attempting to invest in the United States, you should do so in either the stocks, bonds or real estate, as they will ensure better conversion rate than saving money in your savings account, which will most certainly catch up with inflation, thus, reducing the value of your money. So there is no fixed time to save, spend or invest, instead of as an entrepreneur, follow the above stats and watch out for signs like in stocks that will either need you to invest or withdraw. What’s more critical in entrepreneurship is in doing the right thing at the right time, like in saving when you should, knowing where and when to invest, and having a clue of when to spend