Don’t be a Fool with Your Money

Ever heard of the ancient saying, “the fool and his money are easily separated”? The statement is just as true today as it was in the past. Though not in the colloquial sense, money and riches can never stay on with a fool who does not know how to make it work for him. Making money is a delicate combination of saving and investing. Too much saving without investing money is as big as waste as too much investing without having enough savings. It is important to understand where to draw the line and how to draw it.

Saving

Saving money can be as simple as accumulating surplus in your bank account or as complex as keeping cash in your home. Saved money, in my definition, does not grow at all or grows at a much slower pace than invested money. To start with, it is important to start saving. Frugal living could be a starting point. The following points will help you save money:

1. Avoid being a compulsive shopper.
2. Avoid hosting extravagant parties and giving expensive gifts.
3. Make it a point to save a certain amount every month.
4. Pack Lunch.
5. Save on energy and power.
6. Eliminate unnecessary expenses.
7. Look for coupons and deals.
8. Use public transport when possible.

Invest

Saving is just one faucet and without proper investments, all savings might just be eroded. Investing should depend upon the monthly earning and the age when investments have been initiated. The best time to start investing is as early as possible. In no particular order, the best investment instruments can be:

1. Invest in bank deposits.
2. Put a part of the money in the stock market.
3. Invest in mutual funds.
4. Invest in real estate if affordable.
5. Invest in tax saving schemes.
6. Buy gold.
7. Buy government bonds
8. Invest in deposits of companies whenever they are available.

Drawing the Line

Drawing the line between savings and investments is the most important part of the growing rich strategy. How much should be saved and how much should go towards investments depends upon how you create a budget for yourself.

Create a budget depending upon the monthly inflow money. Divide your monthly income into four parts:

1. Savings.
2. Investments.
3. Insurance.
4. Expenditure.

Depending upon your age allocate percentage of funds to the above categories. If you are young and below forty, it is advisable to invest more in risky instruments like stocks and mutual funds and less in savings and insurance. On the other hand as you progress in life it is advisable to invest more in Insurance and savings.

Outcome

The basic tenet is to save more and invest much more. Having a defined strategy will get you to the top in no time. But do not expect results overnight. It will take at least five years for you to see the outcome of your investments.