By now you are familiar with concept of saving and just how vital it is to achieving each of your financial goals. Now it is time to put your savings to good use by allowing it to work for you. Assuming you have already funded your emergency fund (3-6 months worth of expenses) and that you have money leftover at the end of the month after you have paid your bills and living expenses, you have something left over. This is the money we will use to invest.
Now that you are ready to starting investing to reach your long-term goals, such as funding a big-ticket purchase or even retirement, this section will help you get started.
Finding the Right Investment
Depending on your specific investment goals, your investment choice may vary. Before selecting any investment option, you should first answer the following questions:
- How much money do you need to save?
- How much time do you have before you need to use the money you saved?
- How much money can you contribute right now?
- Can you contribute more or less in the future?
- Will you be using your primary savings to fund this investment?
Stocks, Bonds, Mutual Funds, and Commodities generally earn more interest over the long run. Therefore, these are considered long-term investments. It is usually not wise to select these options if you have a short period of time to invest. For shorter periods, you should consider a traditional short-term investment, such as Money-Market Funds, Certificate of Deposits (CD’s), and Treasury Bills (T-Bills).
Whatever investment vehicle you choose, it’s important that you find a balance between risks and return that you are comfortable with. If you are not comfortable with any investment, it is a good idea not to move forward. This will save you from worrying later on.