How to Save and Invest Money in 2018

As soon as you have a stable income, you should start thinking about your future and focus your attention on saving and investing. This can seem complicated, especially to those who have gotten used to living paycheck-to-paycheck, but with a few simple rules you can make the most of your income.

It’s important to note that saving and investing aren’t something that’s available only to the very wealthy; everyone can save and therefore invest some of their income. All it takes is staying organized and being disciplined with your money.

Analyze your finances

Before you can start investing or saving, you need to find out how much you are making and what your monthly expenses are. That’s relatively easy to do, all it takes is keeping track of each purchase you make and all the income you earn.

If you do this for a month or two, you’ll start noticing patterns in your behavior. That means that you can cut back on behaviors that are wasteful or at least not working for your benefit. Sticking to this plan is the harder part.

Decide on the amount

The simplest way to start saving is to decide on the amount that you plan to set aside each month. This can be an actual figure or it can be a percentage of your earnings. This decision isn’t to be made lightly; it’s best to figure out what your expenses are first and only start saving once everything else is covered.

When you’ve made this decision you need to stick to it. One of the ways of accomplishing this is to make the process automatic. That can be arranged with your bank and a portion of your income will simply be transferred to a savings account each month.

Long-term investing

One of the best long-term investment options are simple Index Funds as they contain the lowest fees and outperform the vast majority of actively managed funds. When you buy an Index Fund, for example like the Total Stock Market Index Fund (VTSAX) from Vanguard, you are basically getting a slice of the entire U.S. economy. Warren Buffet has even been on record to recommend Index Investing over picking individual stocks to new investors.

Index investing is very passive but you have to be in it for the long-term to reap the rewards. Alternatively, you could purchase a gold bullion and try your hand in precious metals, which are also a safe investment in the long-run.

Peer to peer lending

Peer to peer lending refers to lending small amounts of money to small and medium business owners directly. This is a faster and less complicated way of getting the money to start your small business. This suits the needs of family-owned businesses, because banks tend to complicate the process.

Peer to peer lending is almost always a safe investment to make and the interest rates are always much higher than those of banks. The amounts are smaller, but this can still prove to be a long-term investment that will generate income for years.

Additional costs

It’s important to keep in mind that investing comes with some hidden costs. This is true for various investments, including retirement funds and 401(k)s. Banks and other financial institutions have fees for their services and you need to ask them about the details because it can add up.

There’s also a matter of taxes that you need to pay on income generated by investing. This isn’t that much in comparison to general income tax, but it’s still something you need to take into consideration.

Saving and investing takes careful planning and preparation. Make sure you know what your goals are and how much money you can set aside before you jump into it.

Author Bio:

Diana Smith is a full time mom of two beautiful girls interested in topics related to finances and latest business technologies. In her free time she enjoys exercising and preparing healthy meals for her family. Follow Diana her on Twitter and Google+.

 

 

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