Telling your money where to go by having a Spending Plan, and paying down debt are very important foundations to mastering your money, however they will not make you wealthy on their own.
If you wish to build wealth you need to save and invest money.
This requires you to make room in your Spending Plan for money that you can allocate to saving and investing. This will likely mean you will have to make trade-off decisions about wants and needs in order to free up money to save or invest.
What is the difference between saving and investing?
Both saving and investing involve setting aside money you have now for the future. This means choosing not to spend it now so that you can have it available to spend in the future.
Saving is usually for the short term which is typically defined as anything from a day to three years. Investing is usually for the medium to long term which is defined as three years or more.
Why save or invest?
One of the first and most important things to save for is an Emergency Fund. This should be an amount of money kept aside for unexpected future events that have a financial impact. Examples include the breakdown of an important appliance or your car, emergency medical care, being unemployed for a few months etc. A rule of thumb is to save enough to cover your monthly expenses for at least three months up to a year.
One of the most important investments to start is for future you when you choose to stop working one day, most likely because of old age and sometimes because of illness, disability or even simply because you just want to spend your time doing something else. You might call this investing for your retirement. This is a long-term investment as it’s one you start in your 20’s and usually continue to invest into for many decades of your Life.
They are many other reasons to save including to buy a car or house, to go on holiday or start a business. Some invest for the fun of it, or to build wealth to leave to their heirs.
Before you can decide where to save or invest, you need to consider your Why?
Why do I want to save or invest?
What do I want to save or invest for?
There are many different ways to save and invest and create wealth. We’re going to take you through the basics of some of the most common ways available to you in South Africa.
Click on “The Secret Way to Get Rich Quickly” to begin.
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