Maximizing Your Financial Growth - Saving vs. Investing
We all know that putting aside funds for the future is smart, especially in today’s economy. But that same economic uncertainty can make the process all the more difficult, too. It is a “double-edged sword” that can be hard to balance, no matter your age or career. Let’s talk about saving, investing, and taking steps to reach your long-term financial goals.
The Fundamentals of Saving Money
Simply “saving money” is a simple enough concept to understand: A process of spending less than you earn. Anything you can put away, and not spend on your monthly needs, can be put aside for savings. A typical savings plan keeps funds in a safe and secure place, in products or accounts with little to no risk.
Some savings may simply be in a basic “savings” account at your bank. If you operate your budget from your checking account, the one you typically use for bills, shopping, and dining out, you can keep a separate savings account, typically at no extra charge if you do so at the same banking institution. This savings account stays separate from your checking, to make it a little harder to spend.
These kinds of savings accounts are nearly always accessible. They are not tied up with specific deadlines or taxation rules for withdrawing the funds. They are often insured or protected by the Federal Deposit Insurance Corporation or the National Credit Union Administration. While your funds are safe and easily accessible, they are not growing substantially, beyond a small interest rate that your bank might offer.
You can grow your savings account by:
Having a portion of your paycheck automatically deposited
Having an automatic transfer from your main checking account to your savings account
Reducing your spending by checking for redundant accounts or unnecessary expenditures
Taking steps to lower your monthly bills, and save that money instead
Understanding Investing: Make Your Money Grow
Investing differs from savings as it is more of an action. Instead of money sitting in an account with just a nominal interest rate, you are putting these funds into a financial product with the goal that your money will grow from its placement.
Lincoln Investment says it best:
“Because of the inherent risk of investing, it is important to adhere to an investment strategy that seeks to minimize the risk of your expected level of return. Your financial advisor has access to professional asset managers with the experience and resources to develop the investment strategies and portfolios that can help you manage risk and achieve your financial goals. Many factors beyond your control impact the performance of your investments. For that reason it’s important to have a strategy that can help you weather the ups and downs of the market.”
With greater potential growth comes greater potential risk. Money that you invest may be stored in methods such as:
Securities
Stocks
Bonds
Mutual funds
These are not federally insured. This means that while your money could grow, it could also decrease. That’s why it’s important to be smart about your investing strategies and make sure you have a diversified portfolio.
To learn more about all your investing options, Investopedia provides a great overview, or you can reach out to my office with any questions.
Combining Saving and Investing for Financial Success
Wherever you are in your financial journey, you’ve likely heard the term “Don’t put all your eggs in one basket.” Placing your goals in one strategy is not a good idea. If you drop this basket, and all of your “eggs” are in it, you will have a whole lot of broken eggs, and none put away for another time!
The same theory can be placed on your finances. It is best to balance both savings AND investing to be sure you are getting the best of both worlds. In order to find the perfect balance for your unique needs, however, it may take the help of a professional.
My office can provide guidance to help you evaluate your present financial situation and your future goals. We can look at how you can choose to mix savings and investing based on your risk tolerance and time horizon. No two families are exactly alike, which is why it’s helpful to have some personalized support.
To make an appointment today with me, visit this link. I look forward to hearing from you!
