(ThyBlackMan.com) Savings and investments are positive signs of growth. You are saving money means you are growing. At the same time, if you are gathering the courage to invest your hard earned money, it means you have saved enough money to take risks. Only the honest investors will tell you to wait for the right time and decide when to invest and when to save money. If you are still confused about saving and investing your money, read on to know what’s right for you according to your current financial status.
5 Times When It’s Better To Invest Money.
1. When you understand how it works
How good something sounds doesn’t matter at all. What matters the most is how much you understand. If you completely understand how it works, you should not delay. If you can’t explain the investment plan clearly it means that either you are not understanding it completely, or there’s something you don’t know or something is hidden from you. If you are ready with a clear idea and you are confident enough about sticking to your investment plans through the up and downs go for it.
2. You’re ready for the possible downside
Are you ready to see the bad? If something bad happens, how much loss can you suffer? If you are ready to accept the volatility, then you are suitable for making an investment. If you are ready to see a possible downside, you can invest money. For example, if you are holding shares of a single company and if that company goes bankrupt, you could lose all. So when you invest, spread your money among different channels. There is a risk in every investment, but if you are ready to take calculated risks, you should focus on investment.
3. When you’re ready to hold forever
It’s really hard to admit that you will invest money in something and hold it forever, but this is how strategic investment plans work. Warren Buffett once said: “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.” The problem with many investors is that they easily get attracted to new information and investment opportunities, but unfortunately, it doesn’t work out well in 80% cases. So if you feel that you are ready to hold for a long time, you can jump into the game.
4. When you have an exit strategy
Getting out of something is not always easy. When you invest in stocks, it’s just easy to come out of it, but some policies don’t let you come out without loss. Getting out of a bad decision in stocks is easy, but some investments including the ones where taxes and fees are applied, coming out with profit can be trickier than you think. If you have an exit strategy then only you should think about investments. If you make frequent changes to your investment strategy, you will most likely lock yourself into something bad.
5. When you know your goals
The most important question is: What are you trying to accomplish? If you can answer this question, and if it is realistic, you can invest money. For any investment, knowing what you want to achieve is more important than any other steps. If you believe that the investment is likely to help you meet the goal then go for it. Your goal can be anything from paying off a home loan to buying a vehicle or creating a new income stream.
5 Times When It’s Better To Save Money.
1. When you lack emergency funds
Look at your current personal and professional life and decide. Jump into investment roller coaster ride only if you have saved enough money to help your family and business survive in cases of emergency. In your personal life, you may or may not be having liabilities. For example, if you are taking care of aged parents, make sure you have money for unexpected healthcare needs. If you are expecting a baby, check if you have enough money for all the potential expenditures. There are many ways to know how much money you need for such emergencies if you look into your future needs carefully. If you have not saved money for any such emergencies, it’s better you save money first, keep this fund aside and then think about investment.
2. When you foresee a financial crisis
Many people jump into investment plans when they see a financial crisis on its way. To make quick money, they just put everything they have hoping for better returns. Investment never works like this. If you just suffered a financial crisis or expecting one to hit you in the future, it’s time to save money. Don’t fall for shortcuts because investment needs patience. For example, you see that your family will need some money in the next month which is a huge amount. Instead of investing what you have, save it and try to save more before the need arises. If you have just survived a financial crisis, don’t put your money anywhere, just save it. Keep your finances in balance by saving money.
3. Before and after a major life event
Are you planning to get married? Did you just get divorced? Are you planning for your child’s higher education? Your financial strategy must be savings-driven. Save money if you are having a specific goal in life for which you need a large amount of money. A short-term investment plan can be very risky. Depending on your needs, save money first and make sure that you can survive for another six months if you lose your job or if your income streams dry up suddenly.
4. When your debt is high
If your debts are easily manageable, you can start investing money, but if you are in debt which is too much, stick to savings. Get rid of the debt and then start investing money into stocks and other options. You should not ignore credit card debt and if you have any loan, it’s better you pay on time and also build up an emergency fund. If you still think that paying all of your debts in one shot will be easy, there are chances that you will not be able to afford the big expenses.
5. When you are the only person earning
If you are the only person at home who earns, there are chances that you don’t save much and you can barely afford to pay your bills. In such cases, the idea of saving money doesn’t seem possible. You may be feeling that when your bank account hits zero many times in a year, why even save? Why can’t you take a risk and invest whatever you have? Because you have to start somewhere. If you are committed, your financial conditions will improve over time. Savings can give you peace of mind and the habit will always help you in the long run.
Staff Writer; Corey Shaw
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