Saving vs. Investing
There is a BIG difference between saving vs. investing your money. Define them? Why are they both so very important?
There is a BIG difference between saving vs. investing your money. Define them? Why are they both so very important?
Savings are low risk funds that must be liquid or available when you need them. The purpose of saving money is so you can have it for a specific purpose within a short time frame. Examples include savings accounts, checking accounts, and certificates of deposit.
Investments are for wealth building, and will not be needed for many years. Investments do involve greater risk, but investments also yield much greater returns when left alone long enough to ride out the turbulence of the stock market.
Saving money is incredibly important. It gives you peace of mind, expands your options for decisions that have a major effect on your quality of life and eventually gives you the option to retire. Most people who are wealthy got there through a combination of their own hard work, savings and investment decisions.
Well said Denny. You laid out the situation quite well and it is clear that you understand the issue in-depth. Please allow me to add to your fine commentary.
Saving money simply means living below your means as you set funds aside for your future. The more you save, the more freedom that is likely to come into your life. Saving = Freedom. Don’t let anyone tell you different. Without a consistent, automated savings program, living paycheck to paycheck until you die is probably going to happen. This places you at the mercy of your current employer, which can be a very bad thing based on the circumstances. Become a Saver!
Investing comes down to putting your money at risk to receive higher returns beyond inflation over time. No risk, no return. Keep reminding yourself of that key fact. The goal here is to take risk based on what you can handle (psychology plays an important part when investing) and then do it at the lowest possible cost. That will take you to no-load index mutual funds and ETFs as you apply modern portfolio theory and a keen understanding of the efficient market hypothesis.
Here is the bottom line: The person who becomes the great saver (20% of their gross income month after month and year after year) and great investor (8% or more return AFTER cost with a large percentage of money invested in those risky and growth producing stock index mutual funds) will set themselves up for a wonderful future that is full of opportunities. A place I call financial freedom. Awake to the possibilities!